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Behavioural targeting on the Internet is not new – but recent impressive results with the technique are making marketers look at it with fresh eyes, Simon van Wyk writes.

High on the Internet marketing buzzword list at the moment is ‘behavioural targeting’. It is now the second-best performing online advertising tactic (behind email house list and tied with paid search at 41%) according to a December survey conducted by Marketing Sherpa in the US.

Meanwhile, nearly one in four US publishing websites told Advertising.com in December that they have the technical capability to provide behavioural targeting to advertisers.

Another Advertising.com survey conducted last year found that behavioural targeting lifted click-through rates by more than 100% and, importantly, lifted conversion rates (people actually buying as a result of the click-through) by up to 3,000%. That’s not a typo 3,000%.

Despite a lack of public research backing up its effectiveness (the above-mentioned survey was conducted - surprise, surprise - by a company working in the behavioural targeting space), behavioural targeting has become one of the most talked-about areas in online advertising.

As anyone who has gone for a job interview in recent years can attest, more and more organisations are relying on past behaviour to predict future behaviour. As well, the realisation that website behaviour is a pretty accurate indicator of service and product purchase intent is not new. Behavioural targeting has been around for years, and data mining for longer.

So what does the term mean? Those of us who have been involved in Internet marketing for a few years would recognise it by another title: personalisation. At its most basic level, behavioural targeting involves serving up individualised advertising and promotional messages to website visitors based on information collected either directly from the user or implied from their traffic history.

If you pay close attention to the behaviours of website visitors over several visits, you can identify people who exhibit similar behaviours and share similar interests and group them into well-defined audience segments. Find the audience segment that matches your advertiser target audience, and everyone  advertisers, website owners and customers - wins.

What’s the buzz?

The reason why behavioural targeting is generating more buzz today is that there are increasingly-sophisticated behavioural metrics tools now available to measure and assess what unique visitors do, so that the right advertisement ends up in front of the right audience. Today’s behavioural targeting can be done on individual websites, on networks and via adware applications.

The eMarketer website sums it up well: “The basic premise behind behavioural targeting is that what’s important for online advertising is not necessarily a page of content or a section of a Web site, but the actual person who is viewing and interacting with that content. Seen in that light, behavioural targeting could presage a shift in the online advertising paradigm away from the notion of buying pages and instead toward the idea of reaching people.”

Instead of buying ads that would appear adjacent to certain content, ads would instead appear only to someone who has demonstrated, through previous actions, that they are potentially interested. The end result, theoretically, would be a perfect economy, where no ad is wasted.

But we’re not there yet, and we probably never will be. Instead, think of behavioural targeting as an evolutionary stopping point on the path toward understanding and reaching a consumer at the optimal moment in time.

Chang Yu, writing in ClickZ, says that behavioural targeting provides marketers with the ability to reach desired segments outside of contextually relevant areas. Desired site placements will be at an all-time premium in 2005. If a marketer wants to reach a segment - behavioural targeting provides a media alternative when those desired site sections are no longer available.

Because behavioural targeting can track recency, it allows marketers to target consumers during a specific purchase cycle phase. Thus, messaging can focus on where that individual consumer is in the purchase funnel.

eMarketer estimates that behavioural targeting accounted for 3.8%, or US$275 million, of the total US$7.3 billion online advertising market in 2003, rising in 2004 to US$627 million, nearly 7% of total online advertising spending.

eMarketer believes there are four triggers leading to this surge in behavioural targeting use:

1. An increase in online ad spending, leading to sold-out inventory at some websites;
2. An increase in the number of consumer products companies advertising online, accompanied by more acceptance of online as part of every media plan;
3. Technological improvements to enable massive, yet targeted, behavioural ad campaigns; and
4. The success of contextual and paid search advertising models.

Consumers are becoming less patient with the intrusiveness of marketing and advertising messages. A recent study by Yankelovich Partners found 65% of those surveyed said they feel ‘constantly bombarded’ by ad messages and 59% feel that ads have very little relevance to them.

Behavioural vs. contextual

According to a recent eMarketer report, behavioural targeting gives advertisers a way to reach large, targeted audiences in a way that contextual advertising cannot. In addition, much of the contextual market consists of text ads, while behaviourally targeted ads are generally display ads, such as banners or buttons or even rich media.

Contextual and search can also be more imprecise than behavioural. eMarketer says: Just because someone read an article about the new Las Vegas monorail doesn’t mean they want to travel there any time soon. A contextual ad for a travel site would be a waste.

But a behavioural system might know if that same person read an article about the monorail, checked hotel rates and looked for books about Las Vegas at an online bookstore. An ad delivered during or shortly after these activities would be exponentially more relevant.

Both behavioural targeting and search have the ability to catch consumers in the moment that they might be interested in receiving information. But behavioural targeting enables advertisers to reach people earlier in the stages of a buying cycle, by delivering ads based on observed actions.

Search, on the other hand, doesnt catch a consumer until he or she actually enters a keyword in a search engine. Additionally, entering a keyword may imply a stronger level of interest than if someone were simply reading a few articles on a given subject. The resultant ad messaging would be very different in these two scenarios.

Andy Chen, writing in ClickZ, predicts that the interactive industry has embarked on what many believe to be its tipping point. Though most online business segments are expected to expand, many are treating behavioural targeting as the wild card search was two years ago.

To say behavioural targeting will change the online landscape as much as search did is a bit bold, but claiming it will change the way online media are bought and sold definitely isn’t. After all, behavioural targeting stands as the only online media element besides search that targets. And advertisers are obsessed with targeting consumer intent.

Behavioural targeting is hot news for Australian marketers too. In the recent HotHouse Interactive survey, of the respondents who indicated that they were interested in finding new ways to buy online media, 60% cited behavioural targeting as the most appealing media buying strategy.