Report: Behavioral Marketing Usage Up 60%

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Despite a substantial year-over-year increase in deployments, behavioral marketing is not expected to capture a large portion of the total online advertising spend, according to analysis from Jupiter Research (a Jupitermedia Corp. division).

"The number of advertisers using behavioral marketing has jumped 60 percent in the last year, and with all the hype surrounding this sector, I expect that number will continue to grow," said Nate Elliott, associate analyst, Jupiter Research.

Often confused with contextual advertising, behavioral marketing campaigns deliver ads based on Web surfing activities, rather than content. The firm found that 16 percent of advertisers have used behavioral marketing tactics in 2004, compared to just 10 percent in 2003, but its future depends on whether marketers readily adopt the strategy.

"Behavioral targeting is a very small market. Even as it grows, it'll never be a dominant force in online advertising. But while it'll remain relatively small, it can still be really useful to marketers, who see great results from behavioral, and to sites, who can take some of their remnant inventory and make it much more valuable," said Nate Elliott, associate analyst, Jupiter Research.

Elliott continued, "But most advertisers still haven't run behavioral ads, and those that have still aren't spending much. Most of the advertisers who've used the site-side behavioral tools, like Tacoda and Revenue Science, have run just one campaign. That's the number that has to grow for this industry to really take off."

The Jupiter report outlines the four popular delivery methods for behavioral ads, with controversial adware [define] counted among them. Large publishers, ad networks and arbitrage firms also sell behavioral marketing campaigns.

Despite the association consumers make between adware and its evil cousin spyware [define], Elliott believes there is definitely a future for adware as a behavioral targeting option.

"Because so many of those using behavioral targeting are direct marketers, the negative connotations around adware won't necessarily make it unattractive. As long as adware can give these marketers results – and it certainly can – they'll keep using it," Elliott said.

Behaviorally targeted ads may have substantial value for marketers but Elliott didnt expect sellers to reap the same revenue benefits. A recent Advertising.com study found that behaviorally targeted ads were more cost-effective than regular impressions because they inspired higher click-through and conversion rates.

"It's going to be tough for companies to make money from behavioral technology alone, because as the big ad servers get into this market the technology will become commoditized. It makes sense for these tech vendors to try to get a piece of the media buy. Even after the technology prices fall, media prices will stay high, because advertisers will still get better results from behavioral ads," Elliott explained.