Is Targeted Advertising Right for Your Publication?
If the same advertiser wants to target multiple segments with variations of the same ad or different ads (or for internal marketing messages), ad targeting always makes sense. If the ad serving technology makes it easy to set, manage, and track the targets, any potential increase in ad interaction will justify the minimal efforts to do the targeting.
The more difficult question to evaluate is when an advertiser only wants to target a segment of the audience. Can additional revenues be gained by letting advertisers target specific segments? Presumably advertisers would pay a higher CPM, and, since they would be reaching a subset of the total audience, the total cost to the advertiser would be lower. It is not always clear, however, if this can translate to additional revenues for the publisher.
Here is a short review of some advertising decision dynamics that can be used to help answer this question and to help better devise and evaluate targeted advertising strategies.
Lets start by looking at ad placement decision from the point of view of the advertiser. From the advertisers perspective, an ad with a cost R can be split into an two ads, one that reaches the prime target and one that reaches everyone else. A simple equation for this would be:
R = T + S
T = value to reach targeted audience
S = value to reach everyone else
From point of view of the publisher, there is an alternative value of the audience not reached by the target ad. Lets call that value V. So, ad targeting makes sense when V > S and would not be feasible otherwise.
In other words, the feasibility of targeted advertising depends on two factors, one, how little the advertiser values the non targeted segment and two how much the publisher values the extra unused space. The value of the unused ad space would be the largest between one of these alternatives: (1) the value of having no ad (particularly true if the ad is intrusive) , (2) the value of a house ad, or (3) the value of running another ad from a second advertiser who wants to target the alternative segment.
Another consideration is that even if targeting is feasible, there may still be a problem convincing the advertiser that the publisher will actually place the right targets. This is particularly true for one time advertisers or low volume advertisers where the long term reputation of the publisher is less established to the advertiser. Independent auditing can eliminate these considerations when the ad serving is done by an ad network or independent service provider. Targeting ads via most ad networks however maybe tedious process, and may not even be supported at all. Utilizing a SaaS type offering with targeted ad serving can best address the reputation and auditing issues that advertiser may have.