Forget Behavioral Targeting – Ad Format Is the Real Problem
Publishers get roughly 4% more revenue for an ad impression that is cookie-enabled – or personalized – versus one that isn’t, according to a recent study by researchers at Carnegie Mellon University, University of Minnesota, and University of California, Irvine. That’s not much. And while the sample was limited – they only reviewed ads for one “large U.S. media company over the course of one week” – it highlights a question publishers have been grappling with for a long time: Is cookie-based ad targeting worth it?
Given the mounting costs of investing in data technology, reputation issues (the “creepy factor”), and regulations like GDPR and CCPA that challenge behavioral ad targeting, the study’s findings suggest that the benefit is minimal. However, as I see it, publishers are focusing on the wrong issue.
The Truth about Display
The problem isn’t necessarily the ad targeting itself; rather, it’s the ad format that’s inherently flawed. According to Smart Insights, the average display ad click-through rate (CTR) across all formats is a measly 0.05% — or 5 clicks per every 10,000 impressions. These “performance” ad units simply aren’t performing, which undercuts publisher revenue while taking up valuable website real estate.
After being bombarded with them for years, consumers just don’t like display ads. This is why a majority (51%) believe publisher sites should feature fewer ads. As a result, more are tuning out the ads or blocking them completely. And while making ads more targeted may increase their effectiveness, it does so only marginally.
To truly drive brand lift and performance online, for the benefit of consumers and brands alike, publishers need to consider new ad formats that consumers actually want to engage with. And while brands are willing to pay more for personalized traditional display impressions, newer, nontraditional ad formats are generally greater revenue opportunities for publishers.
Branded content, native articles, video, games, and podcasts are all good examples. These types of campaigns are demonstrably more interesting to readers than a traditional display ad, and they command premium prices. Branded content, in particular, drives improved consumer engagement. A stat from Markerly bears that out, with consumers spending almost 345 times longer engaging with branded content compared to a standard display ad. And, on the revenue side, a publisher like Forbes, which has gone all-in on branded content, now gets 40% of its total ad revenue from such content solutions.
Transitioning to branded content and, particularly, interactive ad formats is critical to draw in users and profit from that growth. Interactive ads can boost time spent with a brand’s campaign by nearly 50% compared to a non-interactive ad. Similarly, other studies that look at the value of gamification in branded content have found that these ads can drive a CTR of more than 28%. Design is also a key factor for publishers to consider. An immersive, aesthetically pleasing ad -- like those created with Facebook Canvas – is more appealing than a standard banner ad and generally leads to stronger performance.
Formats that combine desirable experience with personalization will ultimately win the day. In fact, one study found that ads that are more interactive and design-oriented are significantly more likely to drive personal recommendations than traditional display ads. Clearly, behavioral targeting can work harder for publishers and brands if the vehicle is more in line with consumer demand.
Scaling High-Impact Formats
One challenge in adopting interactive and high-impact ad experiences is scale. Given the content and technology requirements, moving beyond traditional display ads is difficult for many publishers, who are seeing their ad dollars shrink. More money is being funneled to Facebook, Google, and Amazon, with Facebook and Google alone making up roughly 60% of all digital ad spend. Most publishers simply don’t have the in-house tools and resources required to build full-fledged interactive and branded content in a scalable way.
Fortunately, third-party content and technology providers – and, to a lesser extent, creative agencies that charge a considerable fee – have emerged to build the infrastructure needed for these types of campaigns. As ad budgets increase for formats like branded content, interactive ads, and game-like ads, it’s likely that more publishers will seek out partnerships with these providers to get a piece of that pie.
In identifying who to work with, publishers should seek out providers with solutions that are easy to onboard and largely self-service. This will make adoption easier and drive greater success over the long-term.
While the research study on personalized, cookie-enabled ad targeting’s value for publishers is interesting, it raises the wrong questions. It’s akin to worrying about the color of a car that has no engine. Instead, publishers need to reconsider the traditional display ad format. Only then can they crack the code on new, more meaningful forms of ad revenue.
Related story: 8 Ways to Increase Digital Ad Revenue by 50% or More
Jessica Rovello is the CEO and co-founder of Arkadium, which provides interactive, visual content to more than 450 of the world’s best-known brands and publishers. Founded in 2001, Arkadium has developed products ranging from games (notably Microsoft Solitaire Collection, one of the most played games of all time) to dynamic editorial tools allowing journalists to embed visual data and interactive content in their articles.