A Blog by Jonathan Low


Jun 21, 2018

Personalized Online Ads Outperform, But Consumers Find Too Many Are 'Creepy'

The data suggest that personalized, often 'retargeted' ads aimed at consumers who have already purchased a similar item outperform others. But questions of advertising tolerance worry marketers.

The reality is that this industry is still in its infancy relative to television and even other forms of digital outreach so customers's attitudes are likely to evolve as they become more familiar with such business models. The question is whether perceptions will become more positive or negative over time. Marketers - even at ad-driven businesses like Facebook - seems to be coming to the realization that self-selection may provide better outcomes than force-feeding reluctant consumers. JL

Austen Hufford reports in the Wall Street Journal:

Click-through rates for retargeted retail advertisements were three times the rates for untargeted ads. 90% of consumers surveyed had seen ads online for a product they had already purchased. Others in the industry have questioned whether such ads are effective, saying this, in its current form, doesn’t drive as many purchase decisions as thought. “Norms in the digital space are still evolving. Marketers and companies don’t really know what the expectations from consumers are.”
Kim Merrikin spent a lot of time online last year researching which car she wanted to buy. Soon, the communications manager at a Seattle nonprofit noticed car advertisements on the websites she visited, even for specific cars she had just researched. In December, she bought a new 2018 Subaru Crosstrek.
The ads didn’t stop.
“A week after I bought a car, these ads were still in my feed,” she says. “They were totally following me to every site with ads on it that I went to.”
Ms. Merrikin’s experience is one shared by pretty much everybody who searches for—and ultimately buys—a product online. According to a recent survey by digital-media-advertising company Nanigans, nearly 90% of consumers surveyed had seen ads online for a product they had already purchased.
While digital ads that follow users around the web have existed for years, online data and advertising practices are being looked at more closely in the wake of the Cambridge Analytica scandal and Russian meddling in the 2016 U.S. presidential election.
No cruise control
Digital advertisements known as retargeted ads attach themselves to consumers who have visited a specific page on a website, added an item to a cart or completed a purchase. Someone who visited the itinerary for a potential cruise vacation might see such “retargeted” ads that push the cruise company or even the specific trip.
“A lot of internet advertising just blends into the background,” says Lisa Farman, an assistant professor at Ithaca College who has studied how people respond to personalized ads. “When you are served an ad for something you had already searched for yourself, I think it serves as a cue to people and perks up their attention and is a red flag.”
Advertisers want to reach audiences that have already expressed interest in their services—a signal that is more powerful than traditional demographic or geographic-based targeting. More-personalized ads are clicked on more often than less-personalized ones: One study by researchers at Boston College and Germany’s University of Bremen said click-through rates for retargeted retail advertisements for specific brand-product categories were about three times the rates for untargeted ads aimed at recent viewers to the retail site.
The market for turning viewers into buyers on the internet is expected to grow. Market-research firm Technology Business Research Inc. says it expects “shopper engagement” spending, which includes large amounts of retargeted ads, to total $38 billion this year and to grow to $99 billion by 2021.
While retargeted ads are increasingly being used, others in the industry, including Boston-based Nanigans, have questioned whether such ads are truly effective, saying this technology, in its current form, doesn’t drive as many purchase decisions as thought. For example, some users who clicked on an ad may have been intending to buy the product regardless.
There is also the risk of turning away potential customers who feel that their privacy is being invaded, something that may not show up in simple reach-click-and-buy reports. In the current climate, users may be more likely than before to view retargeted ads as creepy.
Still, it is relatively easy to take some steps to reduce online retargeting. Both Facebook Inc. FB 2.28% and Alphabet Inc.’s GOOGL 0.46% Google let users opt out of those types of ads. The companies also provide individuals with some details about why they are being served specific types of advertisements.
Facebook users can disable retargeted ads by going to their advertising settings and disabling “Ads based on data from partners.” For Google’s advertising network, users can go to the Digital Advertising Alliance’s WebChoices Tool and click to opt out at once for dozens of advertising networks, including Google’s.
Consumers also can choose to enable “privacy modes” on many internet browsers, which prevent some common methods of tracking. In Google’s Chrome browser, users can click on the three vertical dots in the upper-right corner to open a new, “incognito” window.
Defending model
In recent months, Facebook executives have given public defenses of the company’s personalized and targeted advertisements, standing by the company’s business model as consumers worry over the safety of their data online.
A Facebook representative recently told the British Parliament that businesses around the world are using 2.2 million versions of its retargeting tool, Facebook Pixel, which generates data that Facebook collects—meaning that Facebook is tracking users across the internet.
Engineers at Facebook have worked to streamline the service’s privacy and advertising choice tools. Chief Executive Mark Zuckerberg said in early May that Facebook was developing a tool to let users erase this website history that Facebook has collected.
In April, Mr. Zuckerberg told members of Congress, “Even though some people don’t like ads, people really don’t like ads that aren’t relevant.”
Chief Operating Officer Sheryl Sandberg in April said in opening remarks at the company’s first-quarter earnings call that Facebook users can see why they are getting specific ads and said users can turn off ads from individual advertisers. On Facebook, users can click on the top-right corner of ads to learn more about them, including how they are being targeted.
‘Not at odds’
“Advertising and protecting people’s information are not at odds,” Ms. Sandberg said, signaling to investors that Facebook wasn’t changing its basic model of providing a free service to users and then making money off them through advertising. “Targeted ads that respect people’s privacy are better ads,” she added.
Ms. Merrikin, the new-car buyer in Seattle, eventually chose to hide the Subaru ads that kept appearing in her internet browsing. She says she decided to buy a Subaru even before she saw the targeted, digital ads. She thinks that too often, retargeted ads can appear creepy and invasive, hurting a company’s ability to build long-term trust with its customers.
Dominick Infante, director of corporate communications for Subaru of America Inc., says the company continues to work toward reducing consumer frustration with ads, including by pushing for more consumer controls and working with auto-shopping websites and its retailers. There can be delays with updating information, which can lead to ads being shown even after a purchase is made, he says.
“Norms in the digital space are still evolving,” says Tami Kim, an assistant professor at the University of Virginia who has studied how consumers respond to online advertising transparency. “Marketers and companies don’t really know what the expectations from consumers are.”


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