Imagine the last time you shopped online for shoes. You likely browsed several websites in search of the right style. After not finding the right shoe, you moved on to reading the news. In the article you read, you notice a display ad for shoes from a completely different website. This is an example of behavioral advertising.
Behavioral Advertising is the practice of serving ads to certain users based on their web behavior. Advertisers create relevant ads based on the user’s browsing history.
In this article, we will cover how behavioral advertising works and why it benefits advertisers.
How Advertisers Use Behavioral Targeting
1. Collect Cookies
When a person visits a website, the site drops a cookie on the user’s hard drive. A cookie is a small piece of data sent from a website. The cookie is stored on the user’s computer by the user’s web browser. Next, the tracking pixel embedded on the site sends user information to the ad serving platform.
2. Create User Profiles
A variety of platforms store and route this type of data. For instance, advertisers may choose to route data through a third-party data management platform or ad serving platform. On the selected platform, this cookie and web activity is associated with a unique user profile.
Information that is gathered includes:
- Age and gender
- Geographic location
- Time spent on a website
- Recency of visit
- Purchase histories
- Signals of intent
- Computer browsers
- Device data
- Pages browsed on a website
- Subscription/registration entries
3. Designate Audience Segment
Next, the platform searches for patterns in user personas or profiles. Advertisers group similar profiles into segments based on the data points collected by the cookies. This process is called audience segmentation.
4. Create Messages that Target Segments
The segment data is a powerful tool for advertisers to understand their unique customer groups. Therefore, advertisers can create messages that are highly relevant to each segment.
The Shoe that Follows You
Let’s return to our example of shoe-shopping. Maybe after an hour of shoe-shopping, you give up on the search. Later, you decide to browse some of your favorite blogs. You may notice banner ads displaying shoes or shoe discounts.
Perhaps you have been searching for a specific pair of leather boots. It’s not a coincidence that ads for a similar pair of shoes seem to follow you while you browse the web.
An advertiser’s data management platform likely noted your clicks, the time you spent on a page, your intent to purchase and the recency of your visit. Due to your browsing history, your user profile fell into a specific audience segment.
The advertiser has created a specific message based on your browsing history. Therefore, the ad-serving platform knows to show you a shoe similar to the one you browsed.
Benefits of Behavioral Advertising
Traditional advertising can seem hit or miss. In other words, carefully crafted messages fall short if they don’t reach the right audience. Consequently, advertisers waste valuable resources and time on ineffective advertising.
On the other hand, behavioral advertising serves the right ad to the right customer at the right time.
Behavioral targeting increases user engagement and click through rates (CTR). As a result, conversion rates improve. Best of all, advertisers see a higher return on investment (ROI) for ads.
Internet users are more likely to click ads that are relevant. According to a recent study by the American Marketing Association, ads using behavior targeting saw CTRs improve by up to 670%.
In addition, average conversion rates sky rocket, according to a study by the Network Advertising Initiative. Ads using demographic targeting lead to a 2.8% conversion rate. However, ads using behavioral advertising lead to a 6.8% conversion rate!
The Right Ad at the Right Time
In conclusion, behavioral advertising can be an extremely powerful tool for advertisers. By serving the right ad at the right time to the right customer, advertisers will see their ad success improve.