Targeted ads solve some challenging problems for advertisers, but also open up brand new ones.
It’s the holy grail of advertising – getting the right ad to the right person, at the right time.
Until the age of the Internet, this was considered impossible. Advertisers had to cast a wide net and simply hope that the right audiences would respond.
Although a great deal of market research goes into billboard ads, television commercials, and radio jingles, they are still essentially limited. The technology of the underlying medium simply doesn’t allow for personalized ad placement.
For Internet-enabled advertisers, however, the story is entirely different. Targeted ads allow businesses to send advertising messages directly to their most valuable potential customers. Crucially, it allows them to do this on an individual, personalized basis.
What Are Targeted Ads
Targeted ads serve advertising content to customers based on their interests, traits, and behaviors. Advertisers identify customers by tracking their activity across the Internet.
There are many different ways to do this, but one of the most common involves using cookies. Cookies are small files that websites create when you visit them. They keep these files on your device, and use them to keep track of your activity.
When you shop for baby clothes on an e-commerce website, it tracks your engagement and uses that information to identify what products interest you the most. Later, when you are reading the news or scrolling down your social media feed, you may see an ad for baby clothes products similar to the ones you looked at.
So far so good. Targeted ads rely on the fact that you’ve expressed interest in buying baby clothes, so it’s probably a good sign that you actually do want to buy some.
But babies grow up fast. In a few months, the clothes you were looking for will no longer be relevant. Advertisers understand this, so they try to learn about you in other ways as well – like through your search engine history and your social media activity.
Search engines and social media platforms are all too happy to share this information with advertisers – for a price. As a result, targeted ads are getting better at predicting what customers want to buy, then showing them the right ads for the right products, and the right time.
The Good: Targeted Ads are Extremely Successful
Targeted ads allow brands to interact with people who are interested in their products. This enables them to waste less time and money showing ads to people who are not likely to become customers. This benefits both advertisers and Internet users directly.
For Internet users, it means that ads have a much higher chance of being relevant and useful. Without targeting, Internet ads would run according to the same metrics as television commercials – they would have to address the broadest possible audience in order to be profitable. That would leave a lot of peoples’ niche interests underserved.
For advertisers, targeted ads are a transformative technology that changes nearly every aspect of the industry. Targeted ads allow small businesses that serve well-defined customer niches to compete with huge corporations, and empower advertisers to segment their audiences based on real-world data.
That means advertisers can:
- Lower costs. Targeted ads cost significantly less than traditional offline advertising methods. Automated ad platforms also feature built-in protection against overspending. As soon as you reach the limit, the platform stops showing your ad.
- Obtain instant results. Most advertising strategies take months to deliver results. For example, SEO campaigns typically don’t show progress until at least six months in. Well-researched digital advertising campaigns can generate leads and boost revenues in days.
- Earn higher returns. Sophisticated targeting algorithms reduce customer acquisition costs by exclusively showing ads to the people who are most likely to become customers. This drives down the price for every click while boosting sales and revenue significantly.
- Re-engage users over time. It’s rare for someone to purchase a product after a single impression. Targeted ads allow brands to stack up impressions and re-engage users across multiple channels, bringing them closer to becoming valuable lifelong customers.
The Bad: What About Digital Privacy?
If having monolithic global search engine companies and social media giants selling your data to advertisers sounds uncomfortable, you’re not alone. Many Internet users feel like targeted ads represent an invasion of their privacy – and lawmakers are listening.
California’s CCPA and Europe’s GDPR are some of the most comprehensive data privacy regulations in existence today. Among other things, they require websites to be transparent about the data they collect on website visitors, and require websites to allow users to opt out of advertising tracking.
Google, Apple, and Mozilla have followed suit by committing to blocking third-party tracking cookies from their web browsers by default. At first, this might seem odd – Google makes 80% of its revenue from ads, after all.
These companies actually stand to gain from this change, since each one operates its own advertising marketplace. Google doesn’t need third-party cookie data, since it already has a wealth of first-hand data to work with. If it can make the user experience better for everyday people by eliminating third-party ads while serving more of its own, all the better for Google.
It’s important to realize that third-party cookies are just one element of the equation. Emerging data science techniques allow organizations like Google and Facebook to make accurate predictions about how individuals will respond to advertising content without even looking at individual user data. They will still use their own first-party data to serve targeted ads to users, even if third-party advertisers cannot.
Ultimately, targeted advertisements and digital privacy have a complex relationship. Every Internet user has a unique definition of which targeted ads are “useful” and which ones are “creepy”. Some people are even considering the radical move of banning targeted ads altogether.
The Ugly: Political Manipulation and Abuse
Like all innovative technologies, targeted advertising can be abused. Today’s digital market environment has led to surging demand for user attention. Since users gravitate towards provocative content, it has become easier than ever to exploit that content to manipulate people.
The same tools digital advertisers use to sell products can be used to promote disinformation, interfere with democratic elections, and manipulate disadvantaged communities. These are all things that have happened in the recent past, are happening right now, and will continue happening as long as it serves someone’s political interest to do so.
When the people creating and distributing ads to highly targeted audiences are selling ideologies instead of products, the entire system takes a much uglier turn. It enables anonymous parties to control the narratives that entire communities use to make sense of the world around them.
The abuse of ad-targeting technologies for political manipulation first came into the public spotlight in 2018. The Cambridge Analytica scandal showed just how powerful these tools could be when put in the wrong hands.
Some of the ugliest examples of this work come from the Senate Committee Report on Russian interference in the 2016 US election. Foreign intelligence operatives flooded social media with conspiracy theories, disinformation, and divisive racial content.
Even now, black and latino voters are disproportionately targeted with content designed to manipulate their behaviors. Other high-profile web publications reliably echo foreign propaganda, and propagate that message further using sensational headlines and highly detailed ad-targeting campaigns.
In many ways, the data privacy revolution that is currently underway is a direct response to the threats of abusing the behavioral data of everyday Internet users en masse. Lawmakers, big tech companies, and advertisers are committing themselves to data privacy and fact-based messaging. Regulators are taking a closer look at how people interact with technology online.
What Would a World Without Targeted Ads Look Like?
If targeted ads were to become illegal tomorrow, social media platforms and free apps would have to find new ways to replace lost ad revenue. The Internet as we know it today is built off of the monetization opportunity that targeted ads offer. Without it, many of the services we take for granted would have to start charging subscriptions.
Advertisers wouldn’t be so quick to wean themselves off of targeted ads, however. They would simply have to gather the data and find contextual uses for it on their own. First-party data would become the most valuable currency of the advertising world.
At the moment, it looks like lawmakers and big tech companies are aligned towards this goal. Advertisers who take notice will be well-prepared for the change when it comes.
Cincopa is a digital asset management and video hosting company that helps advertisers gather and analyze data directly from viewer engagement. Start making first-party data integral to your ad targeting strategy with our help.