1 targeting behavioral the state of online marketing: and other key trends

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TARGETINGTARGETINGBEHAVIORALBEHAVIORALTHE STATE OF ONLINE MARKETING:THE STATE OF ONLINE MARKETING:

AND OTHER KEY TRENDSAND OTHER KEY TRENDS

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Advertisers are spending more and more online as a result of increased Internet penetration and media usage.

Online Penetration in Western Europe, 2004 to 2010

Source: Jupiter Research, June 2005

THE STATE OF ONLINE MARKETING

0%

10%

20%

30%

40%

50%

60%

70%

2004 2005 2006 2007 2008 2009 2010

Total Online Advertising Revenues in Western Europe, 2003 to 2009

Source: Jupiter Research, August 2004

€ 0.0

€ 0.5

€ 1.0

€ 1.5

€ 2.0

€ 2.5

€ 3.0

€ 3.5

€ 4.0

€ 4.5

€ 5.0

2003 2004 2005 2006 2007 2008 2009

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Online spending will continue to increase, due to new opportunities provided by such emerging marketing tactics as behavioral targeting.

Top-Performing Online Tactics as a % of Respondents

Source: MarketingSherpa, 2005

Email house list

Paid search

Behavioral targeting

Affiliates

Rich media ads

US Behavioral Targeting Ad Spending

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

2003 2004 2005

In M

illio

ns

Source: eMarketer, 2004


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WHAT IS BEHAVIORAL TARGETING?

Behavioral targeting reaches users whose previous actions indicate that they are interested in a given product or service.

Adware Solutions Site-Side Solutions Network Solutions

Targets ads via software that users

download onto their computers.

Enables publishers to target audiences within

their site based on surfing behavior.

Targets specific audience behaviors across a network

of websites.

NEWS

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Adware solutions are highly targeted and have significant reach, but are prone to privacy issues and a high churn rate.

ADWARE SOLUTIONS

Behavioral Targeting via Downloadable Software

Consumers agree to receive

advertising in order to download free

software.

Adware programs track user activities

and deliver pop-up ads based

on behavior.

Advertising Professionals’ Opinion Regarding the Use of Adware

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Strongly Opposed

Somewhat Opposed

Somewhat Supportive

Strongly Supportive

Source: AAF, November 2004

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Site-side solutions are highly targeted and increase the value ofpublishers’ run-of-site inventory, but provide limited reach for advertisers.

SITE-SIDE SOLUTIONS

Lift in Brand Metrics – Behavioral vs. Content Targeting on iVillage

0%

10%

20%

30%

40%

50%

60%

70%

80%

Brand Awareness

Behavioral Targeting

Content Targeting

Purchase Intent

Brand Favorability

Source: Dynamic Logic

Behavioral Targeting within a Single Website

Inventory within the travel section of a news website

can often book quickly.

Behavioral targeting reaches

this “travel” audience across

the publisher’s site.

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Capitalizing on Behavior on Third-Party Websites

Pixels on publisher sites are used to create behavioral

segments based on site activity.

Advertiser campaigns are served across

websites to their desired segment.

Capitalizing on Behavior on the Advertiser’s Website

Pixels on advertiser’s site anonymously

identify activity, e.g., researched flights.

Ads sent to those users after they exit the site and visit sites within

the network.

Network solutions overcome the challenges of alternative providers intheir ability to deliver a highly targeted audience with sizeable reach.

NETWORK SOLUTIONS

Network Behavioral Targeting vs. Single Site Content Sponsorship

Source: 24/7 Real Media

Single Site Content Sponsorship

CPM CTR

Network Behavioral Targeting

Lift in CVRLift in CTR

3,130%225%Advertiser C

2,232%94%Advertiser B

167%192%Advertiser A

Percent Lift – Behavioral vs. Run of Network

Source: Advertising.com

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Behavioral targeting delivers unprecedented relevancy, response and ROI for online advertisers and publishers.

WHY THE RISE IN BEHAVIORAL TARGETING?

Source: eMarketer, September 2004

Why Behavioral Targeting is Hot

Increased spending by traditional advertisers who rely heavily on targeting

Increase in online spending leadsto sold-out inventory on some sites

Success of contextual and search has marketers demanding more relevant advertising

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Increased spending results in valuable “content” selling out. Behavioral targeting reaches users across content based on observed interests.


Percent Sold Inventory, 2003 – 2005

Source: AdRelevance, house ads versus non-house ads

0%

10%

20%

30%

40%

50%

60%

70%

80%

Q2’2003 Q1’2004 Q1’2005

US Online Advertising Spending, 2003 – 2008 (in billions)

$0

$5

$10

$15

$20

$25

2003 2004 2005 2006 2007 2008

Source: eMarketer, May 2005

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Marketers have benefited from the relevancy of contextual and search. Behavioral targeting is an extension of this “in the moment” marketing.


Users' Willingness to Click on Ads that are More Relevant to Their Interests

Source: Ponemon Institute, Revenue Science, Chapell & Associates, September 2004

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Absolutely yes

Most likely yes

Unsure Most likely no

Absolutely no

% o

f Res

pond

ents

US Search Marketing Spending, by Segment, 2003-2008 (in millions)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

2003 2004 2005 2006 2007 2008

Contextual listings

Paid placement

Source: Forrester Research, October 2003

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Goal: Drive consumers to configure a new Volkswagen A4and request information from a local dealer.

CASE EXAMPLE: VOLKSWAGEN

Demographic Targeting

Targeted to consumers who researched cars online in the past six months

Targeted to users who visited the VW website but did not configure a vehicle

Behavioral Targeting

Source: Advertising.com Source: Advertising.com

Impressions 9.7M

Configurations 10,449

Information Requests 7,970

Conversion Rate for Configurations 42%

Conversion Rate for Info Requests 32%

Impressions 100M

Configurations 8,495

Information Requests 3,609

Conversion Rate for Configurations 10%

Conversion Rate for Info Requests 4%

1,077 configurations and 822 requests

per million impressions

85 configurations and 36 requests

per million impressions

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Goal: Leverage behavioral targeting to convert consumers who visited the Lane Bryant website but did not complete a sale.

CASE EXAMPLE:

Source: Advertising.com

Cost per Sale

Target CPS Actual CPS

Cos

t pe

r sa

le Source: Advertising.com

Revenue Goal Delivered Revenue

Onl

ine

sale

s re

venu

e Beat cost-per-sale goal by 85%

Beat revenue goal by 408%

Delivered Revenue

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Goal: Convert consumers who researched VoIP services, but did not immediately purchase.

CASE EXAMPLE:

Source: Advertising.com Source: Advertising.com

0200

600

1,000

1,400

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Con

vers

ions

Week

Conversion Rates – With and Without Behavioral Targeting

Without Behavioral With BehavioralCon

vers

ion

Rat

e

Conversion rate more

than doubled

Weekly Conversions – Before and After Behavioral Targeting

Behavioral targeting

implemented

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Behavioral targeting enables marketers to reach in-marketconsumers and increases the value of publisher inventory.

Increased spending by traditional advertisers

Increase spending = sold-out inventory

Success of contextual and search advertising

Experience/comfort with audience segmentation offline will lead to increased behavioral dollars online

Ability to create behavioral segments across content increases the value of run-of-site inventory

Behavioral targeting provides the level of relevancy – and response – delivered by the ever-popular search marketing

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Source: eMarketer, September 2004

For continued growth, providers must address the underlyingchallenges and issues associated with behavioral targeting.

BEHAVIORAL TARGETING CHALLENGES

Challenges of Behavioral Targeting

Consumer privacy concerns

The debate over data ownership

Lack of industry standardization

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With the rise of network solutions, the issue of data ownership hasbecome a challenge for website publishers and their behavioral partners.


Overcoming Data Ownership Issues

Networks and publishers must establish a clear policy with regards to:

What data will be shared How the data will be used Ultimate ownership of the data

The Consumer Data Trail

NETWORKNETWORK

WEBSITE

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Publishers, technology providers and advertisers define each behavioralsegment/audience differently and lack universal success metrics.


Overcoming Standardization Issues

While awaiting industry standardization,advertisers must define on their own:

The audience they want to reach and how behavioral targets are defined

The definition of success, e.g., conversions, audience composition, brand lift, against which all providers are measured

Standardization

There are currently no industry standards with regards to

how behavioral targeting is defined and measured.

Publishers

?

TechnologyProviders

?

Advertisers

?

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THE FUTURE OF BEHAVIORAL TARGETING

As targeting, tracking and reporting technologies advance, behavioral solutions will expand across objectives and channels.

The rise of network solutions

Multi-channel behavioral targeting

Increased accountability

With advertisers demanding increased reach, network solutions will continue to grow

Advertisers are looking past basic reach metrics to determine campaign impact on actual revenue

Behavioral solutions are expanding beyond the Web to include search- and email-driven platforms

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THE FUTURE OF ONLINE MARKETING

Wireless advertising will also grow, as a result of increased use of mobile devices by European consumers.

European Mobile Marketing Spending, 2004 to 2010 (in millions)

Source: Jupiter Research, April 2005

European Wireless Penetration, 2004 to 2010

Source: Jupiter Research, April 2005

71%

72%

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76%

77%

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79%

80%

2004 2005 2006 2007 2008 2009 2010€ 0

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2004 2005 2006 2007 2008 2009 2010

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Advertisers will continue to shift media dollars to the Internet as consumers increase their online usage and marketing technologies advance.


Questions? For additional information,

please contact Advertising.com’s Danish office:

Århusgade 88, 4.2100 Copenhagen

Phone: + 45 36 91 38 00Email: [email protected]

1 targeting behavioral the state of online marketing: and other key trends

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