The Cost of Targeting

Most marketing professionals would agree that the key to successful advertising in any medium is the ability to deliver a clear, innovative message to a highly targeted audience. With common sense on the marketer’s part, a relevant audience will be more interested simply because the message is pertinent to the viewers’ interests. It wouldn’t make sense for ClickZ to advertise to doctors or construction workers, but a megasale for stethoscopes or hardhats would likely turn a few heads.

There is no question that targeting is a powerful strategy. The only problem is that it can often be very difficult and costly to isolate a target audience. Whether or not targeting is worth the additional expense is a major issue often overlooked when planning online ad campaigns. Is it worth paying an outrageous $60 CPM on a site-specific buy, or would the dollars be better spent advertising to a broader audience at a lower cost?

The answer to this question depends on the nature of the product or service being advertised and how defined the target audience is. There are certain cases when advertising is only applicable to a single, highly defined audience. However, the appropriate audience can often be highly concentrated within a larger audience and sometimes has no true limits at all.

It can be very costly if an advertiser does not recognize that its ads apply to a larger audience than anticipated and then proceed limiting its ad placements to a few select, costly placements that provide limited exposure. It is critical to understand your audience before setting limits. An online travel-booking site is a good example of an advertiser that could consider a few different strategies. One might take a very targeted approach of placing ads strictly on individual travel sites, network travel channels, and search engines. Although the ads are highly targeted, the advertiser will be pay premiums, especially with higher-profile web properties.

Another approach to consider is buying very inexpensive inventory from advertising networks, with ads weighted in desired channels when possible. There are often great deals available with ad networks, especially when they have their periodic fire sales. When these deals arise, it is time to weigh your options. Let’s assume we have $10,000 left to spend and are deciding between a $2 CPM untargeted ad placement and a $40 CPM highly targeted placement.

The choice is really between buying 5 million banner impressions served to a general audience (likely with a strong percentage of online travelers anyhow) versus 250,000 targeted banners. Where should we draw the line between our targeting objective and the value of mass exposure?

In cases like these, the mass exposure offered by the run of a network deal seems more appealing. Travel ads can appeal to most Internet users, since online travel services are one of the most popular and fastest-growing online services today. Potential users are surfing everywhere, not just the most obvious places.

A second reason to justify this choice is the value of the mass exposure obtained. Although the advertiser benefits from twenty times the exposure, it also broadens its reach of people seeing its ads across thousands of web sites. Reach is another key factor that is often overlooked in online advertising, since it is important to show ads to new people. I know we’re all sick of hearing the results of the Adknowledge Q1 study, but ad exposure still converts even when click-through rates are low. Therefore, it always helps to be seen by more and more new users.

There are often cases, however, where buying the cheap, untargeted traffic is not nearly as suitable. Online advertisers selling very niche-specific, high-end, or industry-specific (B2B advertisers) goods and services might be better off paying the high premiums to aggressively hit their target audience exclusively.

For example, our agency has recently partnered with a start-up site that will be targeting health professionals online. It is unlikely that its ad dollars would be best spent purchasing inexpensive run of network inventory, since an overwhelming majority of the ads would be viewed by completely irrelevant audiences. In these cases, advertisers may prefer advertising on specific niche or industry sites, email marketing, and keyword-relevant banner advertising on search engines. If post-click conversions are the advertiser’s main objective, then these can be some of its best options.

Of course, most advertisers’ audiences fall somewhere between the two extremes of pinpoint targeting and mass audience. It is important to understand your audience before spending your ad dollars in the wrong places. There is no question that targeting (the first lesson in Advertising 101) is still the best way to reach your audience. However, if your target audience is a strong percentage of the overall Internet population, it can pay dividends to expand your viewer base.

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