Behaviorally Targeted Ads Twice as Effective?

Chris Crum | Staff Writer

An interesting report was released by the National Advertising Initiative (NAI) this week, which concluded that behaviorally-targeted ads are more than twice as valuable, and twice as effective as non-targeted online ads.

Last year, behaviorally targeted ads secured an average of 2.68 times as much revenue per ad as non-targeted “run of network” ads, based on data from 12 major ad networks. The weighted average cost per thousand ad impressions (CPM) for behaviorally targeted ads was $4.12, as opposed to $1.98 for run-of-network ads.

“Over the past several months, policy discussion around behaviorally-targeted advertising has lacked a critical foundation, because there had never been an empirical assessment of the value of such advertising to ad networks, consumers, and publishers,” said Beales. “This study found that behaviorally targeted advertising is a critical component of ad network, publisher, and advertiser success. Behaviorally targeted ads sell for twice the price and offer twice the effectiveness of normal run-of-network ads, significantly enhancing the advertising revenue engine driving the growth of the Internet.”

Other findings from the report include:

– Behaviorally-targeted ads accounted for 17.9% of respondents’ advertising revenue, with revenue increasing from 16.2% in Q1 to 19.4% in Q4 2009.

– Over half of the respondents’ ad revenue – 54.6% – went towards the purchase of inventory and was therefore shared with publishers and content producers to support their businesses.

– Data from a smaller subset of the survey respondents suggested that users who clicked on a behaviorally-targeted ad were more than twice as likely to complete a transaction or sale with that site than those who clicked a standard run-of-service ad (6.8% vs. 2.8%).

– Total online ad revenue for the twelve companies who participated in the study was $3.323 billion in 2009.

“This study demonstrates the increasing significance of behavioral advertising to the economic model supporting free online content and services for consumers, as well as the need for careful consideration of policies that would affect the current online advertising marketplace and the innovation it supports” said Charles Curran, Executive Director of the NAI. “Our members recognize the importance of responsible practices for online behavioral advertising, and we are pleased that more than 40 companies, including all ten of the largest ad networks, have adopted the NAI’s self-regulatory Code. We will continue to work closely with policymakers in Congress and the administration to give consumers better information, tools and choices, while making online advertising even more relevant to their needs.”

The report can be found here (pdf) in its entirety.

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