By adjusting the way they think about audiences, and using the Net to pinpoint those audiences, marketers can significantly increase the effectiveness of their online buys.

One of the original promises of Internet advertising was the ability to target ads with laser-like precision – to be able to display advertising to only the most relevant audiences with zero waste.

To an extent, basic forms of online ad targeting delivered on that promise, especially keyword-triggered ads and basic forms of registration-based targeting. When a single targeting filter is used, Internet advertising comes closest to delivering on its promise.

However, it’s rare that advertisers want to use only one targeting filter. Age, sex, household income, education, the presence of children in the household – these are all targeting criteria that are well-known to traditional advertisers. And they tend to use them in combination with one another. Most television advertising buys, for example, are guaranteed on at least two qualifiers – usually age and sex.

Targeting is Data-Driven

Internet marketing is still a pretty new endeavor for a lot of clients, so many of them are still looking at targeting the way it has been done for these last few decades.

"Since Internet marketing is still new to a lot of clients, they tend to focus on the basic targeting attributes that are available from other media sources," confirms Suzy Lahey, product marketing manager, Targeting & Direct Marketing for Yahoo. "These are targeting concepts that are easily understood and create consistency of campaign audiences across media channels."

However, the Internet lends itself to such data-rich components of advertising activity, using traditional targeting filters just scratches the surface on the kinds of targeting options available.

In the online world, many advertising venues often have trouble engaging more than one targeting filter. This is a function of the percentages of site users who provide the relevant information for advertisers to be able to reliably target. One of our media buyers here at Underscore learned about this early in his career – the hard way. A site had contracted with him to deliver a geo-targeted keyword buy. The buyer had figured that geographic targeting information was available for all of the site’s visitors. In reality, the size of the audience for which geography could be reasonably ascertained was much smaller. As a result, the potential reach for the buy was decreased drastically – to the point at which only a few dozen impressions could be served per month.

We’ve come a long way since then, though. Site publishers are learning to make better use of internal data assets and external databases, both of which contribute significantly to a site’s ability to offer targeting to advertisers. One technology provider that is helping publishers to leverage those data assets is TACODA Systems.

“TACODA clients are able to use its proprietary technology to extract actionable user data, often combining it with offline data, to obtain precise profiles of who is on their sites,” says TACODA CEO Dave Morgan. “Groups with similar interests or demographic characteristics can be segmented to provide high efficiency for products or services that require a ‘class’ rather than ‘mass’ pitch. A couple of TACODA-enabled sites like to do extra number crunching for marketing with a separate tool, but they’ll take that data and feed it back to TACODA for targeting in its ad server, email server, or content server.”

The more publishers can understand about the people who visit their sites, the better targeting options they can offer to advertisers. Online advertising programs are becoming increasingly data-driven.

The Basics on Targeting and Data

There are three basic types of data that publishers can use to beef up their targeting abilities:

• Observed data – Data points that can be gathered by direct observation of a user. This can include content sections visited, exposure to advertising, interests, and many of the valuable bits of information that are gleaned from observing HTTP requests, such as IP address, browser version and operating system.
• Declared data – Data that comes from direct input from a user. This can include things like the ZIP code submitted by a user during registration, answers to surveys and questionnaires, and opt-ins for certain types of information.
• External data – Data that comes from external sources. For instance, some newspaper sites have been taking offline subscriber data and marrying it up with user profiles they’ve collected online, giving them numerous data points by which to target in the future.

Collected responsibly, these data types can all contribute to a robust targeting offering.

Balancing Privacy and Targeted Communications

As the Internet has evolved as a communications medium, there has been significant concern on the part of consumers about how advertising is targeted online. Consumers are not necessarily comfortable with Websites targeting advertising based on details the site compiles about them. Although profiling is standard practice for the marketing industry, especially the direct-response business, profiling is less transparent to the consumer in the online channel. Thus, the battle over privacy often flares up in the form of very public skirmishes in the online arena.

“Companies can either have PII (Personally Identifiable Information) or have consumer insights -- but if combined that is when some consumers and privacy groups have an issue,” says Scott Eagle, chief marketing officer of behavioral marketing company Gator. “Hence some portals and search engines have come under fire for having both.”

Eagle says that Gator does not collect PII, and that this has kept consumer issues to an absolute minimum. “Since we do all our profiles on an anonymous basis -- we have no PII -- there have never been any consumer issues in the past five years since the start of our model,” he says.

Stellar Targeting Requires Stellar Research

Knowing more about an audience is the key to being able to target it effectively. Thus, research and the technology behind targeting are intertwined as the industry moves closer to one-to-one targeting.

“Both research and technology are required for successful targeting,” says Morgan. “Technology is only as smart as what you put into it, and what passes for ‘research’ is sometimes a restatement of numbers that have been derived mechanically without serious analysis. The best tools do the difficult extractions for you and automate the mundane tasks, but they also require you to know your advertiser’s goals and how to use the technology to reach them. Sometimes adding panel-based data from comScore Media Metrix, or mapping your zip records to PRIZM clusters, or even adding your offline subscription list, can give you richer audience profiles. You need to know why and when and how you should do this, and you need tools that are flexible enough to handle it and do the required targeting once you’ve selected and analyzed the data.”

Lahey of Yahoo agrees, stating that research is the more important of the two. She sees better research as being the key to improving the industry’s targeting capabilities. "Emphasis should be put on understanding the breadth of online data and what that means for marketers-- options available and performance associated with it," says Lahey. "In addition, the industry should focus on finding palatable ways to integrating offline and online consumer activity to get a more comprehensive view of the consumer and better understand cause and effect relationships and the impact of all the media working together."

She points out that Yahoo! Consumer Direct, supported by AC Nielsen, is an opt-in panel of users culled from ACNielsen’s HomeScan panel, allowing Yahoo! and ACN to analyze the online activities and offline purchase patterns in order to better model and target users and advertising.

Truly, the ways in which we will be able to target advertising in the future will be limited only by the imagination. Advertisers will need to be well-versed not only with their target audiences, but also with how segments of those audiences behave with respect to the product or service being offered. Media planners will need to understand their targets from not only a demographic standpoint, but also from a behavioral, psychographic, and interest standpoint. Different types of potential customers will react to messaging in different ways. Currently, the technology to target and segment these different types of consumers exists, so media planners and advertisers will need to become experts in audience segmentation.

“In order to have scale – tens or hundreds of millions of user profiles and insights-- there needs to be technology deployed to help marketers/advertisers understand consumer needs with little/no consumer involvement,” says Eagle. “Gator's behavioral marketing engine is one of these solutions. Another might be Google's use of page crawlers.”

Targeting That Performs

One question you might be asking yourself is, “Do the results justify the cost of the technology to implement complex targeting?” After all, if the investment of time and technology to improve targeting produces only a tiny lift in campaign effectiveness, it might not be worth it. Results, however, have shown that such investments are wise.

“One TACODA customer, Belo Interactive, has more than a million registered users for its DallasNews.com site,” says Morgan. “Combining registration data with observed behavior and interests in AMS (TACODA’s Audience Management System) has helped the site to improve results by an astounding 2200% in a recent campaign that has been reported extensively. But note that it is the combination of declared and observed data plus the ability to target specifically against the resulting profile using the Audience Management System that drives the performance.”

Similar results have been reported for targeted ads offered by ad sellers such as Gator, WhenU and other behavioral targeting plays.

Lahey indicates that Yahoo! has had good success, with costs being far outweighed by the benefits. "For high-ticket items that are considered purchases, we’ve seen a high level of success with purchase intender targeting where we can identify users that are ‘in-market’ based on the amount of time they spend researching online in a concentrated window," she says.

Currently Yahoo! has these kinds of targeting programs built around purchase intenders for Autos – e.g. users about to purchase a car; Travel -- users about to buy an airline ticket or book a hotel or rent a car; and Shopping-Electronics.

Moving Toward One-To-One? Or Moving Toward Something Better?

One-to-one marketing has been a promise of Web advertising since its early days. The notion of using technology to facilitate the building of meaningful marketing relationships is attractive, but some would argue that targeting technologies are moving us toward something closer to mass personalization.

“One-to-one is not an economical model for any medium,” says Morgan. “What works is efficiency – that is reaching a narrowly defined audience with precision with an appropriate message. The Internet is the only medium that can provide that kind of precision to large audience segments.”

Others might argue that the core promise of one-to-one versus that of mass personalization is more of a semantic issue.

“We are all proving that one-to-one marketing to hundreds of millions of users is doable -- and in fact, may be the highest performing ROI for advertisers,” says Eagle. “The staggering growth rates of this category and companies support this POV.”

An Adjustment in the Way Planners Think?

Any media planner would jump at the chance to increase the effectiveness of his online media buy twofold, much less 2200%. They can do this by adjusting the way they think about audiences. It requires adding to the traditional arsenal of demographic targeting options – adding behavior, psychographics, lifestyles and interests. It will likely be an adjustment that takes time, but remember that the first to adapt reap the rewards of the first-mover advantage.