Targeting Does Matter

    “I know half of my advertising is wasted. I just don’t know which half!”
    — John Wanamaker, department store pioneer and advertising prophet

For just about every online advertiser, the answer has been, “All of it.”

The Internet promised to fulfill the marketer’s dream of targeting the ideal customer. Yet for publishers and advertisers, online advertising has become a nightmare of broken promises, poor results, dwindling revenue — and a tsunami of negative press.

The growing consensus is that online advertising doesn’t deliver for publishers or advertisers. That consensus is dead wrong.

Online advertising is here to stay, but it must become more disciplined — and above all else, more targeted — if it is to grow into a mature industry. This applies to both advertisers and publishers.

As an advertiser, I feel like a mushroom when I speak to online ad salespeople: I’m kept in the dark and fed copious quantities of manure. I don’t think I’ve ever spoken to a salesperson who didn’t lie to me about the size of the audience and expected click-throughs or who didn’t support inflated prices with a wildly optimistic return-on-investment (ROI) spreadsheet. To paraphrase an old gag, “How can you tell when a salesperson is lying? The lips move.”

My response: Make it up in volume. I buy a boatload of impressions and beat the vendor down on price until I get my ROI. It’s crude (and doesn’t make any friends), but it’s effective.

The problem is, this is a short-term strategy that will ultimately backfire on both the advertiser and the publisher. By turning online advertising into a bulk, untargeted commodity, advertisers and publishers are mortgaging the future by alienating consumers.

Let’s do the math. Assume that an advertisement draws a 0.5 percent click-through rate, and assume a post-click-through conversion rate of 0.5 percent. Those are numbers about which most advertisers would be ecstatic. Yet that means that only 1 out of ever 40,000 impressions ever results in a sale.

As a consumer, I see only two positive outcomes when it comes to advertisements: They could be clever enough to make me laugh, and they could help me make a buying decision. I’ve been surfing the Internet regularly since 1995, and I’ve yet to see an ad, banner, email, or something else that was clever enough to make me laugh. (I may have laughed for other reasons, but trust me, that laughter wasn’t a positive sign for the advertiser or publisher!)

So that leaves helping me buy something I want.

Yet if only 1 in 40,000 impressions results in a sale, that means 99.99975 percent of online advertising is useless to me. Is it any wonder that we’ve trained consumers to utterly ignore our advertising messages?

By responding to falling response rates by pumping up the volume of ads, the advertisers and publishers of the online advertising industry have been acting like the Weimar Republic — we’ve been printing money, and not in the good sense of that phrase. The hyperinflation of customer alienation results in a vicious circle. Because consumers don’t pay attention, we shower them with more banners and emails. Because those banners and emails don’t create value for consumers, they pay even less attention, prompting us to up the volume of ads, prompting them to pay less attention, and so on.

I know one newsletter that in the last six months has gone from monthly to weekly to daily publication in response to falling advertising rates. Yet despite publishing 20 times as often, the publisher’s monthly advertising revenue has declined 80 percent — because the rate advertisers have been willing to pay has fallen 99 percent.

It may end up taking a million impressions to make a single sale unless we break this circle.

And to break the circle, we need to target. We have to reach the right person (demographic targeting) at the right time (situational targeting) with the right method (contextual targeting). Each method of targeting is useless on its own; effective marketing combines all three.

When I say “targeting,” most people likely think of classic demographic targeting, such as selling Stri-Dex acne pads to teenagers. But demographic targeting in isolation is insufficient. Placing Stri-Dex ads on the back of Britney Spears tickets isn’t going to draw much of a response, because the message is coming at the wrong time and in the wrong context.

An effective campaign triangulates all three types of targeting. For example, Stri-Dex could buy product placement in a regular facial hygiene column of a teen magazine. This would reach the right person (appearance-conscious teens) at the right time (when they’re thinking about their faces) with the right method (fully integrated in the professional recommendations of the article).

Online marketers need to apply the same level of discipline and attention to detail. If you’re selling customer relationship management (CRM) software rather than simply purchasing off-the-shelf sponsorship of 50 newsletters, you need to find a publisher that caters to your ideal customer and get your product pitch integrated into an article on choosing the right CRM suite. If you’re a publisher, you need to find ways to create these triangulated advertising opportunities and recruit the ideal advertisers.

Either way, you have to have the discipline to buy or sell fewer campaigns and fewer impressions.

Sound like a far cry from today’s “cheaper by the bushel” online advertising? Yes. Sound like a lot of work? Absolutely. But such discipline and hard work are essential if advertisers and publishers are to break the vicious circle of commodity ads and make consumers a valuable — and renewable — revenue source.

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