What’s the Buzz Behind Behavioral Advertising?

Behavioral advertising has been getting plenty of attention lately for being the next big thing since the advent of contextual advertising. Why are search marketers so excited?
Recent studies have shown that behavioral advertising converts better than contextual ad targeting. But there is some confusion about what behavioral advertising is, and particularly, what it isn’t. There is also the concern about privacy issues that surround the idea of targeting ads based on individual user behavior. And with behavior targeted advertising being very new in comparison to the familiar methods traditional banner ads or contextual advertising, some people get nervous about being targeted with ads today because of a website they visited yesterday.
What exactly is behavioral targeting? This refers to advertising that is targeted to a specific individual based on that user’s previous surfing behavior. This is quite different from the more common targeting method of displaying ads matched to the specific content of an individual page or to all users in general. With behavior targeting, this would mean that two people could see vastly different ads when viewing the identical webpage at the same time.
For example, the person who frequents sporting sites might see ads for hockey tickets or golf clubs on a page about the local business economy, while the woman who visits travel sites regularly might see ads for vacation packages or travel agents. These ads, while not related to the article about the business economy, are still very targeted to that particular user at that particular time. And this super tight targeting of the individual is what makes behavioral targeting so successful to those advertisers using it.
Studies have shown that conversions are higher when people are targeted through behavior rather than content because behavior can determine a person’s actions. Whether it is looking at specific sections of an online newspaper or visiting a certain type of site more than once, those actions are used to determine each user’s interests. And it is those actions that make conversions.
Advertising.com’s study in October 2005 found that not only did behavioral advertising convert at a significantly higher rate than contextual advertising, but that CTR rates were also higher. Essentially, this means advertisers need fewer ad impressions to generate a conversion. And those users that click are prime for converting into a sale or completing a specific action.
However there are some significant obstacles that behavior targeting ad networks are facing, the largest being the implications that are associated with targeting individual users based upon what they do while surfing online.
There is a misconception that all behavioral targeting has the “big brother watching” aspect to it, which is not necessarily true. For example, today you might look at the online real estate listings in the online version of the newspaper servicing your city. And tomorrow, through behavioral targeting, you might see ads for mortgages or local realtors in your area. In this instance, the only personal information used to target you with these ads was strictly the fact that you viewed real estate ads in that specific newspaper the day before.
But exactly how are they collecting this data in order to be able to target the individual? The main ad networks offering behavioral targeting use a few different methods to determine this. And interestingly, often this data is gathered through the use of publisher programs, where webmasters allow their visitors to receive a cookie or image when they land on a site.
Tacoda’s Audience Networks program drops cookies on participating websites. Advertising.com uses a single pixel image on publisher sites in the AudienceExtend program, and publishers earn revenue when their site’s visitors later take action on a network site. Kanoodle’s BrightAds Cookies program also financially rewards a publisher when the cookie they drop is later used to take action on a behaviorally targeted ad on another site. All of these companies have privacy policies in place that detail how their collected data is used, and publishers dropping cookies do not have access to any visitor’s surfing history across the targeting network.
What will hurt behavioral targeting? The largest obstacles are privacy concerns and the protections people enable on their computers to ensure their privacy. This includes ad-blocking programs, not accepting third party cookies and programs or settings that automatically clear cookies daily or at the end of each browser session. Many spyware protection programs flag cookies, including ones used by behavioral targeting ad networks, as suspicious and urge users to delete them. This results in confusion by users about cookies and how safe or dangerous they really are and makes them less likely to accept third-party cookies.
Another problem of behavioral advertising is the inability to differentiate between multiple users’ surfing habits on the same computer, something that is common in family households or with roommates. The woman who might have seen real estate ads might actually see sporting ticket ads because her husband checked the scores the night before. And this can decrease conversions, because while in actuality the targeting worked as it was supposed to, it resulted in targeting the wrong family member at the time the ads were shown.
Behavioral targeting is definitely an up and coming ad format, even though it accounts for a relatively small percentage of online advertising. Currently, only 8% of all online advertising is behaviorally targeted. But with current studies showing how well it works and converts for advertisers, it can only mean more advertising dollars will be steered towards this method of targeting.
And behavioral advertising is not just limited to image and text ads. Tacoda has just teamed up with rich media video advertising Tremor Network to provide behavior targeted ads inserted into online videos. So there are still new ad avenues to explore through this type of ad targeting in the future, as behavior targeting gains more ground.
None of the big three search engines currently offer behavioral targeting in their advertising platforms for self serve advertisers. Microsoft adCenter comes closest with their extensive demographic ad targeting capabilities. However, with all the buzz around user privacy, it will be interesting to watch and see which one of the three jumps into the behavioral targeting game first, and particularly how they handle the privacy aspect of it. But it is very likely that all three are currently working on the back end of targeting through behavior, even if they are not currently making it available on a large scale.
Behavioral targeted ads could also get huge exposure through the use of a large scale publisher program to display behavior targeted ads, similar in style to the Google AdSense or Yahoo Publisher Network contextual programs, or within either of those two current programs. Mass adoption by publishers offering the space for the advertisements, not to mention the behavioral targeting an extensive publisher program could provide by gathering individual user habits for end ad targeting, could be the tipping point that results in behavioral ad targeting getting the exposure it would need. And with a publisher program displaying behavioral ads, it would drop the need for some behavioral ad targeting programs to pay a bounty to publishers to drop their cookies for the targeting to be successful.
Over the next two years

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