The Impact of Behavioral Targeting on Ad Revenue

How do you measure the success of your ad campaign? As advertising is not an exact science, there is no one way of determining whether the marketing methods are hitting the right mark. However, it can all boil down to the ad revenue. As such, advertisers would rely on campaigns that convert and make money.

In the past, behavioral targeting seemed to be an effective money-making strategy by helping advertisers zero in on an online user’s browsing history and shopping behavior. Organizations often use this method to craft relevant advertisements based on a user’s online interests and habits, which can be gathered by looking at the target’s recent Web searches, highly visited sites, geographical location, and purchase histories. Data points gathered can help advertisers build the buyer persona that will guide their campaigns. However, with Google’s announcement of phasing out of third-party cookies that allow advertisers to gather user data, behavioral targeting can become a tedious process. Third-party cookies provide advertisers all the salient features of a user’s online behavior as they visit many different websites. With behavioral targeting facing some difficulties, how will it affect an organization’s ad revenue?

What is the Impact of Behavioral Targeting on Ad Revenue?

Before the third-party cookie phase-out, behavioral targeting is an ideal advertising scheme. For advertisers, it means they can create better ads that cater to highly-specific targets. For publishers, it gives them better ad revenues. For consumers, they no longer have to deal with irrelevant and annoying advertisements. However, as the years went by, several online publishers are now taking a closer look at the impact of behavioral targeting on their ad revenue amid the mounting government regulations that affect the online advertising industry.

A recent study tackled this exact concern. The result? Behavioral targeting does little to increase a publisher’s ad revenue. Ad tech firms enjoy most of the gains. The study analyzed how the use of cookies can improve earnings. They found that behaviorally targeted advertisements resulted in 4% higher CPMs.

While the research has notable flaws, like not mentioning the type of cookies used or the name of the publisher used in the study, it seems that the results were echoed in the survey conducted by Digiday. The poll, which included 40 publisher higher-ups, asked about how behavioral targeting affected their revenues.

Based on the survey, about 45% of the publishers reported that behavioral targeting does not provide any significant increase in their incomes, and only 33% said that the marketing methods significantly improved their ad revenues. Meanwhile, roughly 23% shared that behavioral targeting was responsible for declines in their ad revenues.

What does this mean for publishers?

What these two findings reveal is that most advertisers and publishers have lost their focus. By looking at the issue, it is easy to see that behavioral targeting is not the issue per se. Instead, the problem lies in the ad format used to reach out to the target users. In the data presented by Smart Insights, the click-through rate of display ads across formats is only 0.05% or only a measly five clicks for 10,000 impressions. This means that ads are not generating enough clicks to increase conversions.

The reason why publishers aren’t earning money is that the ads are underperforming. There should be a shift away from traditional display ads that do not provide context to the users. Publishers must reassess their strategies and put their resources on ad formats that actually work, such as rewarded videos that are more interesting and relevant to the target. That said, behavioral targeting combined with the right ad format can have a significant impact on ad revenue.

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