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Congress has struck fear in the hearts of digital marketers that regulation will squash the potential of targeted ads. But something else might get in the way of online targeting's success: customer preference.
According to a recent academic study, big targeted ads online are actually no more effective than run of the mill banner ads. Combining the effectiveness of roadblock ads with targeting may seem like a no brainer to marketers, but web surfers aren't responding as expected.
The University of Toronto's Avi Goldfarb and MIT's Catherine E. Tucker examined 2,892 distinct web ad campaigns on different websites. They then surveyed almost 900 people for each campaign.
Goldfard told AdAge:
"We were interested in the basic question of whether ads work better if they're targeted and more in your face, more visible. We were expecting some kind of linear effect, that you would get a particular jump in effectiveness -- but the opposite is the case."
Both matching advertising to its surrounding content and increasing an ad's obstructiveness have proven to be effective ways of getting people's attention online. But the study found combining both methods actually decreases people's interest in clicking on ads.
And while its been years now that marketers have been proclaiming the simple banner ad dead, Goldfarb and Tucker actually found boring banner ads to be about as effective as highly targeted, obtrusive ads online. When a prominent ad is targeted, the study found people were only 0.3% more likely buy a product than when shown a regular banner with no contextual relevance.
According to Goldfarb:
"That has implications for more sensitive areas like finance and health sites. For people who are more privacy sensitive, there was an overall negative effect. For them, these ads don't work at all.
"Our results show privacy matters in something of a subtle way in online advertising. Sometimes privacy violations are fine, sometimes they're not."
Priivacy groups are quick to argue for the regulation of online advertising, but if targeted ads don't prove effective with consumers, the issue isn't likely to get to that point. Why would marketers pay more for ads that don't work?
According to the study:
If advertisers replace ads that combine contextual targeting and high visibility with the standard ads that our estimates suggest are equally effective, we provide back-of-the-envelope calculations that suggest advertisers could cut ad spending by over 5% without affecting ad performance."
Goldfarb and Tucker found that the larger ads simple magnified people's perception of being manipulated by advertising online:
"Results suggest a possible explanation for the growing bifurcation in internet advertising between highly targeted plain text ads and more visually striking but less
It's common knowledge that customers often avoid looking at banner advertising online. Getting them to pay more attention to advertising that is relevant to their interests is a major goal of digital marketers. But if people are going to get turned off by more relevant ads, perhaps we've finally found an online marketing privacy breach that customers won't ignore.