THE STATE OF ONLINE MARKETING:

BEHAVIORAL
TARGETING
AND OTHER KEY TRENDS

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 THE STATE OF ONLINE MARKETING
Advertisers are spending more and more online as a
result of increased Internet penetration and media usage.

Online Penetration in Total Online Advertising Revenues

Western Europe, 2004 to 2010 in Western Europe, 2003 to 2009
70% € 5.0
€ 4.5
60%
€ 4.0
50% € 3.5
€ 3.0
40%
€ 2.5
30% € 2.0
20% € 1.5
€ 1.0
10% € 0.5
0% € 0.0
2004 2005 2006 2007 2008 2009 2010 2003 2004 2005 2006 2007 2008 2009

Source: Jupiter Research, June 2005 Source: Jupiter Research, August 2004

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 THE STATE OF ONLINE MARKETING
Online spending will continue to increase, due to new opportunities
provided by such emerging marketing tactics as behavioral targeting.

US Behavioral Top-Performing Online

Targeting Ad Spending Tactics as a % of Respondents
$1,000
$900
$800 Rich
$700 media ads Email
$600
house list

$500
In Millions

$400 Affiliates
$300
Paid
search
$200
Behavioral
$100
targeting
$0
2003 2004 2005

Source: eMarketer, 2004 Source: MarketingSherpa, 2005

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 WHAT IS BEHAVIORAL TARGETING?
Behavioral targeting reaches users whose previous actions
indicate that they are interested in a given product or service.

Adware Solutions Site-Side Solutions Network Solutions

NEWS

Targets ads via Enables publishers to Targets specific

software that users target audiences within audience behaviors
download onto their site based on across a network
their computers. surfing behavior. of websites.

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 ADWARE SOLUTIONS
Adware solutions are highly targeted and have significant
reach, but are prone to privacy issues and a high churn rate.

Behavioral Targeting via Advertising Professionals’ Opinion

Downloadable Software Regarding the Use of Adware
45%
40%
35%
30%
25%
20%
Consumers agree Adware programs 15%
to receive track user activities 10%
advertising in order and deliver 5%
to download free pop-up ads based 0%
software. on behavior. Strongly Somewhat Somewhat Strongly
Opposed Opposed Supportive Supportive

Source: AAF, November 2004

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 SITE-SIDE SOLUTIONS
Site-side solutions are highly targeted and increase the value of
publishers’ run-of-site inventory, but provide limited reach for advertisers.

Behavioral Targeting within Lift in Brand Metrics – Behavioral

a Single Website vs. Content Targeting on iVillage
80%
Behavioral
70% Targeting
60%
Content
50% Targeting
40%

Inventory within Behavioral 30%

the travel section targeting reaches 20%
of a news website this “travel” 10%
can often book audience across
0%
quickly. the publisher’s site. Brand Purchase Brand
Awareness Intent Favorability

Source: Dynamic Logic

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 NETWORK SOLUTIONS
Network solutions overcome the challenges of alternative providers in
their ability to deliver a highly targeted audience with sizeable reach.

Percent
Capitalizing Lift –
on Behavior on Network Behavioral
Capitalizing Targeting
on Behavior on vs.
Behavioral vs. Run Website
the Advertiser’s of Network SingleThird-Party
Site Content
Websites
Sponsorship

Single Site
Lift in CTR Lift in CVR
Content
Sponsorship

Network
Advertiser A 192% 167% Behavioral
Targeting

Pixels on
Advertiser B 94%Ads sent to those
2,232% Pixels on publisher Advertiser
advertiser’s site users after they sites are used to campaigns are
anonymously exit the site and create behavioral served across
identify activity,
Advertiser C e.g., 225%visit sites within
3,130% segments based on websites to their
researched flights. the network. site activity. desired segment.
CPM CTR

Source: Advertising.com Source: 24/7 Real Media

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 WHY THE RISE IN BEHAVIORAL TARGETING?
Behavioral targeting delivers unprecedented relevancy,
response and ROI for online advertisers and publishers.

Why Behavioral Targeting is Hot

Increased spending by traditional

advertisers who rely heavily on targeting
Increase in online spending leads
to sold-out inventory on some sites
Success of contextual and search
has marketers demanding more
relevant advertising

Source: eMarketer, September 2004

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 WHY THE RISE IN BEHAVIORAL TARGETING?
Increased spending results in valuable “content” selling out. Behavioral
targeting reaches users across content based on observed interests.

US Online Advertising Spending, Percent Sold Inventory,

2003 – 2008 (in billions) 2003 – 2005
$25 80%

70%
$20
60%

50%
$15
40%
$10 30%

20%
$5
10%

$0 0%
2003 2004 2005 2006 2007 2008 Q2’2003 Q1’2004 Q1’2005

Source: eMarketer, May 2005 Source: AdRelevance, house ads versus non-house ads

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 WHY THE RISE IN BEHAVIORAL TARGETING?
Marketers have benefited from the relevancy of contextual and search.
Behavioral targeting is an extension of this “in the moment” marketing.

US Search Marketing Spending, by Users' Willingness to Click on Ads that

Segment, 2003-2008 (in millions) are More Relevant to Their Interests
$5,000 45%
Contextual
$4,500 listings 40%
$4,000 35%

% of Respondents
$3,500 Paid
30%
placement
$3,000 25%
$2,500
20%
$2,000
15%
$1,500
10%
$1,000
$500 5%
$0 0%
2003 2004 2005 2006 2007 2008 Absolutely Most
Unsure Most
Absolutely no
yes likely yes likely no

Source: Forrester Research, October 2003 Source: Ponemon Institute, Revenue Science, Chapell & Associates, September 2004

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 CASE EXAMPLE: VOLKSWAGEN
Goal: Drive consumers to configure a new Volkswagen A4
and request information from a local dealer.

85 configurations 1,077 configurations

and 36 requests and 822 requests
per million per million
impressions impressions
Demographic Targeting Behavioral Targeting
Impressions 100M Impressions 9.7M
Configurations 8,495 Configurations 10,449
Information Requests 3,609 Information Requests 7,970
Conversion Rate for Configurations 10% Conversion Rate for Configurations 42%
Conversion Rate for Info Requests 4% Conversion Rate for Info Requests 32%

 Targeted to consumers who researched  Targeted to users who visited the VW

cars online in the past six months website but did not configure a vehicle
Source: Advertising.com Source: Advertising.com

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 CASE EXAMPLE:
Goal: Leverage behavioral targeting to convert consumers who
visited the Lane Bryant website but did not complete a sale.

Delivered Revenue Cost per Sale

Beat
revenue
goal by Beat
Online sales revenue

Cost per sale

408% cost-per-
sale goal
by 85%

Revenue Goal Delivered Revenue Target CPS Actual CPS

Source: Advertising.com Source: Advertising.com

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 CASE EXAMPLE:
Goal: Convert consumers who researched
VoIP services, but did not immediately purchase.

Conversion
rate more
Behavioral than doubled
targeting
Weekly Conversions – Before and Conversion Rates – With and
implemented
After Behavioral Targeting Without Behavioral Targeting
1,400
Conversions

1,000

600 Conversion Rate

200
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 Without Behavioral With Behavioral
Week
Source: Advertising.com Source: Advertising.com

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 WHY THE RISE IN BEHAVIORAL TARGETING?
Behavioral targeting enables marketers to reach in-market
consumers and increases the value of publisher inventory.

Increased spending by Increase spending = Success of contextual

traditional advertisers sold-out inventory and search advertising

 Experience/comfort  Ability to create  Behavioral targeting

with audience behavioral provides the level of
segmentation segments across relevancy – and
offline will lead to content increases response – delivered
increased behavioral the value of run-of- by the ever-popular
dollars online site inventory search marketing

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 BEHAVIORAL TARGETING CHALLENGES
For continued growth, providers must address the underlying
challenges and issues associated with behavioral targeting.

Challenges of Behavioral Targeting

Consumer privacy concerns

The debate over data ownership

Lack of industry standardization

Source: eMarketer, September 2004

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 BEHAVIORAL TARGETING CHALLENGES
With the rise of network solutions, the issue of data ownership has
become a challenge for website publishers and their behavioral partners.

The Consumer Data Trail Overcoming Data Ownership Issues

WEBSITE

Networks and publishers must

NETWORK establish a clear policy with
regards to:

 What data will be shared

 How the data will be used
 Ultimate ownership of the data

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 BEHAVIORAL TARGETING CHALLENGES
Publishers, technology providers and advertisers define each behavioral
segment/audience differently and lack universal success metrics.

Standardization Overcoming Standardization Issues

Technology
Publishers Advertisers
Providers While awaiting industry standardization,
? ? advertisers must define on their own:
?

 The audience they want to reach and

There are currently no industry
standards with regards to
how behavioral targeting is
defined and measured.
how behavioral targets are defined
 The definition of success, e.g.,
conversions, audience composition,
brand lift, against which all providers
are measured

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 THE FUTURE OF BEHAVIORAL TARGETING
As targeting, tracking and reporting technologies advance,
behavioral solutions will expand across objectives and channels.

The rise of Multi-channel Increased

network solutions behavioral targeting accountability

 With advertisers  Behavioral solutions  Advertisers are

demanding are expanding looking past basic
increased reach, beyond the Web reach metrics to
network solutions to include search- determine campaign
will continue and email-driven impact on actual
to grow platforms revenue

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 THE FUTURE OF ONLINE MARKETING
Wireless advertising will also grow, as a result of
increased use of mobile devices by European consumers.

European Wireless Penetration, European Mobile Marketing

2004 to 2010 Spending, 2004 to 2010 (in millions)
80% € 800
79% € 700
78% € 600
77%
€ 500
76%
€ 400
75%
€ 300
74%
73% € 200

72% € 100
71% €0
2004 2005 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 2009 2010

Source: Jupiter Research, April 2005 Source: Jupiter Research, April 2005

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 THE STATE OF ONLINE MARKETING
Advertisers will continue to shift media dollars to the Internet as consumers
increase their online usage and marketing technologies advance.

Questions?
For additional information,
please contact
Advertising.com’s Danish office:

Århusgade 88, 4.
2100 Copenhagen
Phone: + 45 36 91 38 00
Email: mchabert@dk.advertising.com

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