Targeted Advertising 101
Posted on 08/11/2021 at 09:50 AM
What is targeted advertising?
It is no secret that digital marketing is a dynamic, high-context field. Understanding current digital marketing tactics can be difficult if professionals are out of practice or just getting started. That in mind, here is a breakdown of targeted advertising at three levels of expertise.
Level one: Targeted advertising allows marketers to send ads to specific groups of people, instead of showing ads to the general public. Ads can be sent directly to users who are more likely to respond favorably.
Level two: Targeted advertising is used to send ads to customized audience lists. The audiences can be curated based on traits, interests, online activity, geography, etc. Audience lists can also be used to serve different styles of ads to different types of users, or steal demand from competitors.
Level three: Targeted advertising campaigns rely on an advertising platform’s ability to collect and categorize consumer data; often through the use of behavior tracking tools like cookies. Data can include demographic information found online and in social profiles, or online activity like purchases and browsing history. This data is used to develop audience lists with a high likelihood of conversion, effectively reducing wasted ad spend.
In a nutshell, targeted advertising is a tool for businesses to reach a more promising audience, based on online consumer behaviors. This is why women may receive ads for products like books and post-graduate degrees, whereas men might receive ads for video games and sports merchandise.
Similarly, advertisements for children’s products are more likely to be served to married adults aged 25-35 than to an unmarried adult age 55-65.
This example, like all targeted ads, relies on the assumption that marketers have correctly identified their target market.
Most targeted ads are build using an advertising platform or network, such as the Google Display Network or Facebook Ads Manager. Developing the ad requires creative collateral (video, images, interactive media), written copy (ad headlines, descriptions, and CTA), as well as a target audience.
Developing the perfect target audience for an ad is a delicate matter. Cast your net too wide, and your ROAS could plummet. Narrow the audience too much, and you could miss out on potential demand.
As of April 2021, Google and Facebook hold the largest share of U.S. digital ad spend at 28.9% and 25.2% respectively. This means that the majority of targeted ads use consumer data gathered by Google and Facebook.
So what kinds of user data can advertisers target? Truthfully, it is easier to recall what data cannot be used for targeted ads. This is a screenshot from Facebook Ads Manager, which shows the baseline filters for targeted ads. Within each section, there are a number of subcategories that can be selected to build a unique target audience.
Targeting based on location is helpful if your product or services are only available in one area, or if a business travels to new locations and wants to promote your upcoming visit. Location targeting can also be helpful for products that are customized to the targeted location. For example, an apparel merchandiser selling matching t-shirts for each of the seven wonders of the world would target the appropriate location with the corresponding t-shirt, instead of advertising locally.
Using age as a targeting factor is one of the easiest ways to differentiate different ad sets. For example, advertising an amusement park to various age groups might involve different highlights. Images highlighting grandparents with their grandkids, or text highlighting senior citizen discounts would be a great reason to segment an ad set by age. This is especially true if the message does not apply to other members of a target market; in this case, young adults or middle-aged parents visiting the park.
Targeting by gender is a relevant and useful tool. As businesses narrow down their target market, it can be tempting to assume that the gender of the target audience should correspond to the gender of the intended consumer. While this is often the case, there are exceptions.
For example: targeting women with a jewelry advertisement in February may not be as effective as targeting men. Similarly, products for school-aged boys and school-aged girls are often purchased by parents of both genders. When developing targeted ads, marketers should be cognizant of discrepancies between the target audience and the end consumer.
In the detailed targeting field, marketers can choose from user demographics, interests, and behaviors. Current market research suggests that targeted ads based on user behavior are the most cost-effective.
Unlike basic targeting factors (age, gender, location, device), detailed targeting will vary across advertising platforms. Google Ads, for example, can only target users based on data that Google has gathered from that user’s online activity. Targeting demographics are limited to self-identified users (those who have reported their demographic information during account setup).
Unlike Google, which recently scaled back detailed targeting, Facebook continues to expand its options for advertisers. Demographic targeting on Facebook, shown below, can include relationship status, major life events, parenthood (including age of children), birthdays and anniversaries, education, income level, and many additional options.
Interests and Intents
When it comes to ads, targeting based on intent can appear most invasive to consumers. While interest targeting may seem crafty and covert, many consumers are unnerved by targeted ads that hit too close to home.
Additional caution should be taken when targeting based on interest, due to the likelihood of self-reporting bias. A user who reported an interest in the Chicago Cubs when they created their Facebook profile in 8th grade (yes, 8th grade) may not be interested years later. This can decrease ROAS if Facebook uses old data for targeted advertising. For the best results, targeted ads should not rely exclusively on user interests.
Google uses a method called “custom intent” to target users based on websites they’ve visited, YouTube videos they’ve watched, and keywords they’ve searched. This method matches ads with users that are likely to have an existing or upcoming need for the advertised product.
Targeting users based on their online behaviors is one of the most effective methods for reaching high-value customers. Unlike demographic and psychographic predictors of demand, behavioral targeting uses patterns in online activity to determine which users are likely to convert on any given ad.
For example, users who are frequently attending music festivals and concerts may have searched for the words ‘concerts this weekend’ on the events section of Facebook. When an advertiser targets the area, Facebook will include the user in the target audience based on their past activity-- even if they have not otherwise expressed an interest in concerts.
Google uses two forms of behavioral targeting when building an audience. In-market and remarketing. In-market includes users who have been shopping online for items comparable to the advertiser’s. Remarketing includes users who have already interacted with the advertiser’s website, ads, or app. Often remarketing campaigns are used to capture users who did not complete their purchase.
Benefits of Targeted Advertising
The benefits of targeted advertising far outweigh the costs.
- Budget-friendly. Using targeted ads within a campaign allows advertisers to set strict budget and daily ad-spend limits. This grants advertisers the freedom to walk away from the ad, without worrying about going over budget.
- Instant return. Many valuable marketing practices require months of maintenance and planning before they will generate revenue. With targeted advertising, ads can generate revenue as soon as they reach users. No delay for machine learning or complex planning.
- Clear reporting. Both Google and Facebook provide comprehensive reporting on user engagement.
- Ad diversity. Targeted ads allow businesses to share different value propositions with each market segment.
Targeted ads are an extraordinary opportunity for marketers to reduce extra spending and capture demand. Not only can targeted advertisements be used to generate sales, they are also helpful for a number of non-sales promotions. Whether businesses are interested in reaching high-value users or improving brand awareness, a strong digital marketing strategy should include targeted advertising.