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The moment I even thought about writing this column I knew it would be criticized. Not because the column is offensive or insulting but because it challenges the usefulness, accuracy, and cost-effectiveness of a targeting methodology (behavioral targeting) that generates a lot of revenue and makes a lot of people a lot of money.

The intent of this column isn’t to say that behavioral targeting (note: many people also refer to this process as audience targeting) isn’t worthwhile, too expensive, or doesn’t work, but to bring up a couple questions and discussion points about behavioral targeting to make people (namely media buyers and planners) think about why they want to behaviorally target in the first place, who they are behaviorally targeting, how accurate is the customer data defining their behavioral targets, and is behaviorally targeting even the right strategy for the campaign in question. Now that we have this out of the way, let’s discuss.

Is the extra cost worth it?

Working with third-party behavioral/audience data providers will add extra cost to your media buy, so you need to make sure you’re adding extra performance benefits to your campaign’s bottom line. The performance lift needs to equal or exceed the extra cost of utilizing third-party data; otherwise you need to reexamine the benefits and usefulness of implementing a behavioral targeting strategy for your campaign.

For instance, let’s pretend you initially ran a campaign targeting a specific set of websites for $3 per 1,000 impressions that generated a click-through rate of 0.05 percent and an effective cost per acquisition of $5. Then your client reads an article about the wonders of behavioral targeting while at the same time he heard a story from his golfing buddy about how they recently ran a behavioral targeting campaign with great success. Now the client calls you up and demands that you add a behavioral targeting element to his campaign. You fish around, make some calls, and get confirmed quotes that the data will cost $2 per 1,000 impressions, bringing your total to $5 per 1,000 impressions. This is a 40 percent increase in campaign cost, so you either need to significantly broaden the websites (inventory overall) you’re targeting to bring the overall media cost down or experience a performance increase equal to the cost increase. In this scenario, you’re looking at having to increase your performance from a 0.05 percent click-through rate to 0.07 percent and your cost per acquisition from $5 to $3.

I’m not saying that this isn’t possible or that implementing behavioral targeting methods isn’t effective, but one needs to be aware of how adding third-party data to your campaign strategy can affect your goal metrics and campaign costs, which both ultimately affect the potential customers you’re reaching and their experience with your client’s advertisement.

Are you sure you want to be targeting people not pages?

A popular theory with behavioral targeting is that the campaign is targeting “people” not “pages,” meaning the campaign is targeting potential customers that have been defined as fitting into a specific category or user type that’s desirable for the campaign at hand rather than the campaign targeting any specific website or website category. Following this theory allows you to move away from buying inventory on specific websites, which can often be a lot more expensive than buying categories of websites or just buying any impression regardless of what website the user is visiting just so that you’re displaying the client’s advertisement when the third-party data provider tells you to do so.

Clearly, as you focus on a broader range of websites to advertise on, you’re offsetting the extra cost of utilizing the third-party data. That said, how is this change in targeting strategy affecting how your client’s advertisement interacts with the potential customer and how is the customer perceiving your client’s brand as it “follows the user” around the Internet?

In this scenario, an end user (defined by a third-party data provider as a potential customer) could be visiting a website of less quality that’s poorly designed, loads slowly, and displays several banners on each page view, flooding the potential user with banners, which becomes annoying and frustrating. As the potential customer experiences this website and is introduced to your client’s advertisements, the annoyance and frustration could easily boil over to the brands they’re seeing and interacting with. We’ve all read forum posts and blog articles about people complaining about advertisements they’ve seen, such as “XYZ brand is following me,” “my computer crashed after seeing XYZ company,” “I can’t believe that XYZ company supports X.” In short, never forget to protect your client’s brand.

Is the behavioral definition accurate?

A lot of people visit a ton of different websites from a handful of different computers in any given day. When working with third-party data providers, you have to ask questions about their data. Not all data is created equally. Not all data companies are created equally. The data is placing anonymous people into various categories and sub-categories, defining them as potential customers and users of products and services related to those categories. In order to do so accurately and to justify the extra cost of the data, the data provider absolutely has to have an accurate process of how they’re defining these potential customers and a data-capturing procedure of intense quality. Otherwise, you’ll end up paying extra for data that won’t work because you’re targeting potential customers that were inaccurately placed into a specific category and in reality have limited or zero interest in the product or service you’re advertising to them.

The analytics and processes that go into data gathering and defining third-party data are complex. You don’t need to understand or know about all of the finite details of this process or the related technology involved. However, you do owe it to your client to be mindful of how implementing a behavioral-targeting methodology will affect the campaign’s cost structure, goal metrics, interaction with potential customers, and the overall health of the client’s brand.

This article was originally published by Tim Nichols on March 28, 2012 at ClickZ.com

Topics: Data Analytics, Behavioral Targeting

Tim Nichols

Written by Tim Nichols

Tim Nichols is a founding partner at ExactDrive, a digital media buying agency with white label, reseller and managed service options available. ExactDrive plans, manages, and optimizes online advertising campaigns with the objective of delivering measurable value and empowering clients to find precisely targeted audiences. ExactDrive has offices in Minneapolis, MN, Milwaukee, WI and SouthWest Florida.

Tim Nichols is also a contributing author on Forbes.com.

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