These advertisements fall into four broad categories, those based on Demographics, Psychographics, Behavioural Variables and 2nd order activities, such as online activity, website history or contextual advertising. The avenue of Behavioural variable based advertising was observed to be the most common method to advertise online.
As far as the efficacy of these advertisements go, there is no question that they are successful. The sheer ubiquity of these advertisements is testament to the lucrative business model that it is. Further analysis of the NAI study shows that advertisers pay up to three times more for cookie based ads and that these ads secured 2.7 times the revenue as compared to non-targeted ads. Futher, the study also highlights that these ads were twice as efficient in securing converts of clicks to buys. This, therefore is conclusive evidence that targeted advertisement is an effective way to reach out to customers. Most users though, still consider these ads as an intrusion of their privacy and are increasingly worried.
The challenge however, for marketers is not from a financial sense. The economics of the targeted advertising are quite sound. The marginal costs of targeted campaigns are far lower than brand related searches ($1.69 per search versus $15.65 per search). The marginal cost of a click is only 13 cents versus that of 72 cents in a non-targeted campaign. Third party data providers, through their sophisticated algorithms, have the ability to gauge the user’s age, marital status, whether the person has children, income level, education level and a motley of other data. The scary prospect of this is that the user’s anonymity is increasingly in name only and can have many negative connotations. As an illustrative example, banks can use this type of data to get apriori knowledge about a person’s income, habits, gender, and race and ascertain credit worthiness in unsavory manners and not issue loans/credit cards solely on the basis of credit worthiness in the traditional sense. The prospect of artificial intelligence getting more and more ‘intelligent’ has the plot of a fabulous science fiction movie written all over it!
This ineluctable flood of targeted advertising requires stringent monitoring from the federal agencies if there is to be a semblance of order and transparency to prevail. The increasing data available online of many people who unwittingly give data away has the potential for large scale exploitation and misuse of data. It thus falls to both Federal agencies and companies to play their parts right. If only more companies like Google practiced the motto, ‘Don’t be Evil’, cyberspace would be a much better place. That said, targeted advertising is a great way for marketers to send specific relevant ads and also reduce their advertising budgets. If regulated properly, it can be a win-win situation for both consumers and companies. However, as with any other tool or technology, data analytics has its own set of limitations and thus should not be overused or depended upon, illustrated by the image below.
The above article is a winning article for Sanrachna (the article writing competition organized by Marketing Club, IIM Bangalore) by Adarsh Pande, 1st year PGDM student at IIM Ranchi.
Chat
Comments
IIM Ranchi
This handle is managed by the Media and PR cell of IIM Ranchi. You can connect to us via mail at mediaprcell_studentcouncil@iimranchi.ac.in
The article is pretty lucid and comprehensive ! No wonder why it's a winning article :)
20 Feb 2015, 01.55 AM