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Behavioural targeting in online ads is more effective

As if there weren't enough reasons for marketers to fear that federal regulators might turn off the behavioural targeting spigot, a new study claims that BT advertising is starting to deliver on those promises that advertisers have been telling privacy advocates about. Conducted by online marketing cooperative Network Advertising Initiative, the study found behavioural targeting to be more than twice as effective as non-targeted ads.

Furthermore, they saw the benefits of behavioural targeting grow over the past year.

Conducted by economist Howard Beales, former Director of the Bureau of Consumer Protection at the FTC, the study surveyed twelve online advertising networks and marketing analytics companies and found that behaviourally-targeted advertising had 6.8% conversion rates versus 2.8% for "run-of-network" ads. The study also found that behavioural advertising accounted for about 18% of advertising revenue for the companies surveyed.

According to Beales:

"Over the past several months, policy discussion around behaviourally-targeted advertising has lacked a critical foundation, because there had never been an empirical assessment of the value of such advertising to ad networks, consumers, and publishers. This study found that behaviourally-targeted advertising is a critical component of ad network, publisher, and advertiser success."

Serving more tailored advertising is a big component of why advertisers want to be able to track consumers online. But there hasn't been much data to support exactly how effective BT is.

Many privacy advocates are unconvinced that tracking is necessary to create more useful advertising. But according to this survey, the importance of BT ads online is growing. The study found that behaviourally-targeted ads accounted for 17.9% of ad revenue for companies surveyed last year. But revenues increased from 16.2% in the first quarter to 19.4% by the last quarter of 2009.

Ingrid Sanders, director of AdAvisor at TARGUSinfo, says that behavioural targeting has become much more common in the last nine months:

"Targeting is driving new opportunities. The market has matured to the point where it's actually possible to apply third party data."

Charles Curran, Executive Director of the NAI thinks that privacy protection and behavioural targeting do not need to be mutually exclusive:

"Our members recognise the importance of responsible practices for online behavioural advertising, and we are pleased that more than 40 companies, including all ten of the largest ad networks, have adopted the NAI's self-regulatory Code."

It remains to be seen if the FTC will agree.

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