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Everything You Need to Know About Behavioral Targeting in Advertising

behavioral advertising

Advertising has come a long way from its traditional forms like print advertising, TV and radio commercials, and direct mail ads. Nowadays, everything is taking place in the online world, including advertising. As more and more consumers are turning toward the digital realm, the benefits of advertising online are increasing by the day. But one of the most prominent game-changers in the digital advertising industry was the introduction of a brand-new technology — behavioral targeting.

Behavioral targeting was like a godsend for advertisers worldwide; it brought with it a solution to the core issue of traditional advertising — the lack of ability to serve customer-centric and relevant ads. 

Targeted advertising quickly took off and became a widespread norm in the online world due to its innovativeness. As many as 93% of businesses saw substantial revenue growth as soon as they implemented it. 

With such huge numbers at play, it quickly became apparent that behavioral targeting was here to stay. And not only did it stay, but it quickly outshined all of its competition and became a norm in the online world. 

For all of you unfamiliar with online behavioral advertising, we are going to cover everything you need to know about it — what it is, how it works, how it compares to other online advertising trends, and its benefits and downsides. So if you wish to learn more about behavioral targeting or are looking to see if this advertising method is for you, you’re in the right place!

What Is Behavioral Targeting and Behavioral Advertising

Behavioral targeting is an online marketing technique that utilizes users’ personal information and online behavior patterns to deliver more relevant ads. This method entails collecting various types of personal data from different online sources, which we’ll cover in-depth a bit later.

OK, now that the definition of behavioral targeting is clear, what is behavioral advertising? Is it the same thing?

Not quite, but it is similar. While behavioral targeting is the technique used to deliver more relevant ads, online behavioral advertising (OBA) is the type of advertising that uses behavioral targeting to provide personalized promotional content to users.

Behavioral advertising goals are to provide the best possible user experience by only delivering ads the users are interested in seeing. This consumer-centric approach by eliminating irrelevant or unappealing messages from the marketing equation is why behavioral targeting proved revolutionary and quickly overshadowed traditional advertising.

How Does Behavioral Advertising Work

As we’ve explained above, behavioral targeting requires marketers to collect information about their audience, analyze it, and then use it to deliver more relevant ads. But the question you probably have is — how do they do that?

The easiest way to collect behavioral data is by using a data management platform (DMP). These platforms usually gather, store, and organize audience information and their behavior on various websites. The advertisers then use that info when deciding whether to display their ads on a particular site. 

DMPs don’t only collect data from websites, though; some of their other sources of information could be CRM systems, mobile apps, and other marketing automation systems, so advertisers have plenty of options.

The entire behavioral targeting process consists of three steps: data collection and analysis, segmentation, and application.

three steps of behavioral targeting

Let’s learn more about each of them!

1. Data Collection and Analysis

The first step in your online behavioral advertising journey is data collection and analysis. Marketing automation systems and DMPs can help you collect different information on your site’s visitors that you can then use to serve relevant ads to them. 

These platforms usually collect that data using cookies or tracking pixels, which you can later use to create a user profile. User or customer profiles contain all the necessary information on your visitors like gender, age, or interests that you can use to provide them with a better advertising experience.

Let’s look at the two primary types of user data you should be collecting:

User Information

Getting essential consumer data is an excellent start when preparing your online behavioral advertising campaign. This information can be anything from the users’ gender to their age. Such data is the first step toward pinpointing and reaching advertisers’ ideal customers. Here are some of the examples of information you will be collecting:

  • Audience Demographics — This data encompasses everything from your customers’ age and gender to their location. DMPs gather this data from a variety of first-, second-, and third-party sources.
  • GEO Information — Knowing where your visitors come from is essential to delivering relevant ads. That is why DMPs can record all your visitors’ IP addresses and identify where your consumers are coming from.
  • Mobile Device Data — With around half of global internet traffic coming from mobile devices, gathering cookies from tablets and phones is essential. If you disregard collecting mobile data, you’re missing out on targeting a significant portion of the digital market.
  • Subscription and Registration Data — By configuring your DMPs to monitor user subscription and registration data, you can get your hands on information like users’ demographics, ZIP codes, or contact information. These can help you pinpoint your visitors’ purchasing habits and locations more accurately. 

All of the above is tangible data that gives advertisers excellent insight into their audience demographics and helps narrow down their target advertising group. But there is much more to behavioral advertising than that.

Consumer Behavior

As we’ve already mentioned, the backbone of behavioral advertising is behavioral targeting, and that is precisely what it sounds like — tracking and analyzing consumer behavior online to learn more about their interests and purchasing habits. The data you can collect to get this information is the following:

  • Most-Visited Pages — Insight into what websites your visitors have been to before can give advertisers a decent idea of their interests.
  • Page Dwell Times — How long people spend on particular websites is an excellent indicator of how engaged they are with their content.
  • Ad and Link Clicks — Tracking what adverts and links users have clicked before hints to advertisers that they might like those particular topics or products.
  • Web Search Queries — Taking data on users’ search engine queries can reveal plenty about their search intent. If these users end up searching for a solution to a problem your product can help with, tracking web search queries is an excellent way to get your services in front of a user in the late stages of the marketing funnel.
  • Website Interactions — This metric gives a lot of information on what types of content your visitors like interacting with. Do they enjoy videos? Rich media, perhaps? Monitoring website interactions will tell you that and allow you to adapt to your audiences’ preferences.
  • Purchase Histories — E-commerce sites get the most from tracking purchase histories. This data is an excellent lead generation tool since it reliably tells you what particular consumers like as they have already bought something similar! 

All of the above behavioral targeting metrics can be incredibly promising if used correctly. But collecting this data is just the first step. Now that you’ve done that, you have to segment and create your target audiences.

2. Segmentation

Once you collect all the necessary behavioral data, it’s time to designate different consumer groups. You will do that by sorting your target audience into multiple groups, which will differ based on your product or service.

Let’s say you are a confectionery that specializes in custom-made cakes. If you decided to try using behavioral targeting to promote your business, you’d likely segment your audience as in the example below:

customer segmentation example

As you can see, the most relevant and most likely customers will be those who’ve already bought cake recently. However, those who have a sweet tooth for chocolate are also quality prospects. As for those who were looking for a cake recipe, their search intent does not match the product you’re offering, but they are still worthy prospects if you’re willing to invest in raising brand awareness. Who knows — maybe they decide it’s easier just to order a cake than bake one when the next birthday comes around?

Advertisers can apply this same process to any product or service out there. Just keep in mind that audience segmenting is crucial to your behavioral advertising campaign’s success!

3. Application

Once you’ve finally designated your audience into different consumer groups, it’s time to implement your campaign. This process entails creating, launching, and optimizing your campaign.

Measure your advertising performance is crucial here. That is because you’re unlikely ever to make the optimal campaign without A/B testing it first. Luckily, most DMPs have various tools you can use to track your campaign’s success, like in-depth analytics, heatmaps, and much more. Using these to their fullest is essential to ensuring your campaign is going in the right direction.

Contextual vs. Behavioral Targeting

Now that you’re familiar with how behavioral targeting works and how you should approach it, it’s time to compare this advertising method to one of its most prominent alternatives — contextual targeting. The differences between the two are pretty straightforward.

an image illustrating the difference between behavioral and contextual targeting
  • Contextual Targeting — This advertising approach entails only showing ads relevant to the content found on a given web page and takes no user information into account. Although contextual targeting seemingly serves relevant ads, they are not always related to the visitors’ interests.
  • Behavioral Targeting — This advertising approach relies on the collected user behavior data to show ads that fit their online behavioral pattern regardless of whether they are related to the page they’re visiting.

Behavioral targeting is superior to contextual targeting regarding user experience and ad relevance. The only downside to this technique over contextual targeting is that behavioral advertising requires investing in data collection, like a reputable DMP. The investment is often well worth it. In 78% of cases, businesses who invested in behavioral targeting and personalizing their ads saw substantial revenue growth, so why not join them?

Pros and Cons of Behavioral Advertising

We’d be remiss not to mention that online behavioral advertising has had both positive and negative reception among consumers and advertisers alike. So despite it being an incredibly effective way of personalizing your ads, it does have its downsides. The best way to decide whether you want to use behavioral targeting to grow your business is to decide yourself. Here are the most notable pros and cons of behavioral advertising.

Pros

  • Better Product Relevancy for Consumers — Personal relevance through personalization that OBA provides is an excellent way to cater to users’ needs and generate fresh leads. 
  • Helps Drive Sales — Delivering engaging, personalized ads is more likely to result in a conversion than non-relevant ones.
  • More Efficient Online Shopping Experience — When looking to make a purchase, most consumers will likely have to browse through dozens of sites and product pages. Your targeted ads can bring the product they need right in front of their eyes, greatly enhancing their shopping experience.
  • Enhanced Targeting Targeting consumers based on their needs and wants is every marketer’s dream. It is something that traditional advertising lacked, but which personalized marketing and behavioral targeting excel at!
  • Better Performance Tracking for Advertisers — All seasoned marketers understand the value of data-driven marketing, which is why being able to track your campaigns’ performance is such a valuable benefit. Having insight into metrics like CTR, conversion rate, and ROI is crucial for adapting and optimizing your strategy for ultimate profit.

Cons

  • Negative Consumer Feedback — Although behavioral targeting serves highly relevant ads, many consumers actively express their opposition to it. The widespread consumer distrust in many brands’ data collection practices led to an overwhelming increase in ad blocking software use. So if you decide to opt for behavioral targeting, be prepared to face many ad blockers and negative audience feedback.
  • Ethical and Privacy Issues — There are specific behavioral targeting ethical issues we must address. One of the primary ones is the intrusive nature of this form of advertising. That has led to many consumers’ hate toward all personalized ads as they believe they intrude on their privacy. According to research by FPF, 72% of U.S. adult internet users were apprehensive about the safety of their personal data most websites collect and their anonymity. Aside from that, data collection has many potential privacy issues, like major security breaches or large-scale illegal selling of private user data. Although user data collection still hasn’t been outlawed, there have been numerous complaints to the global cybersecurity governing bodies raising the above issues, so it’s worth keeping this in mind.

Is Behavioral Advertising the Best Approach?

With all the above in mind, we cannot give a definitive answer to this question. Behavioral targeting gave advertisers worldwide the tools needed to optimize their ad spend by targeting only the most relevant consumers. At the same time, behavioral advertising has proven superior to all other forms of online and traditional advertising; that much is undeniable.

However, OBA does bring multiple legitimate privacy concerns that are yet to be addressed, but it’s only a matter of time before these questions reach the governments worldwide. So the question is — what will happen when it does? Will its effectiveness be impaired? Will it be banned? Or will it remain unchanged? We cannot say. But one thing is sure — using behavioral targeting can be an excellent tool for growing your business! The only question is if that will still be the case in the future.

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