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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
targeted ads." 

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.

Image: CNET

Meghan Keane

Published 17 June, 2010 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

721 more posts from this author

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Tony Evans, Corporate Development Director at Crimtan

So this is about in-your-face, disruptive contextual ads shouting 'BUY ME' - right. And people don't like them? What a surprise. Not exactly highly targeted ads are they.

The way this article was written and it's approach to the subject suggested that it was about behavioural targeting. Are you confused, or are you trying to confuse your readers?

about 6 years ago

Meghan Keane

Meghan Keane, US Editor at Econsultancy

Tony, It's not quite so simple. The study found that in your face ads work — if they're not contextually targeted. But combining targeting with big roadblock ads is actually less effective than you might think.

about 6 years ago

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Tony Evans, Corporate Development Director at Crimtan

But they only tested roadblocks contextually. If you're saying that roadblocks work out of context then behaviourally targeted roadblocks could work.

And the conclusion of the article "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." is way off the mark. Nothing in this survey suggests people are turned off by relevant ads - and what's privacy got to do with it?

about 6 years ago

Meghan Keane

Meghan Keane, US Editor at Econsultancy

Tony, If web surfers are turned off by ads that match the surrounding text (which in the realm of targeting is pretty low on the creepiness scale), what makes you think they wouldn't be creeped out by ads that are directed to them personally? I don't think that's much of a leap.

about 6 years ago

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Tony Evans, Corporate Development Director at Crimtan

The survey didn't say that web surfers are turned off by contextual targeting - they were turned off by BIG contextual ads. Also, users might be a bit 'creeped out' at first (people were creeped out by train travel when it first arrived), but that doesn't mean that behavioural ads aren't effective. And where does anyone surveyed say they found them creepy anyway.

No point arguing about this in public. As I said I think the piece draws unsupported conclusions and created an article based on preconceptions rather than facts.

about 6 years ago

Meghan Keane

Meghan Keane, US Editor at Econsultancy

Tony, You're welcome to your opinion. But I don't have any preconceptions about targeting that created this article. I, like the study's authors, assumed consumers who click on both contextual ads and large ads would click more often when the two are combined. As Goldfarb said: "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."

about 6 years ago

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