Search advertising has proved the effectiveness of matching text ads to user intent, and it's leading more advertisers to look at linking their display ads to prior Web behavior.
Over half of marketers already use behavioral targeting, while another 31 percent intend to start this year, according to a recent Forrester Research survey. While search uses queries as a direct signal of intent, behavioral targeting relies on Web use to indicate consumer interests.
"Search has proven itself to be so successful, and marketers are interested in translating that same type of activity into other media," said Shar VanBoskirk, a Forrester analyst.
While advertisers have for years been pouring money into search, they are now running into a saturation problem: Search ads account for approximately 40 percent of online ad spending, according to the Interactive Advertising Bureau, yet search pages are less than 10 percent of the Web, noted Bill Gossman, CEO of Revenue Science, a Bellevue, Wash., behavioral targeting company. "There's only so much of the Internet you can monetize with search," he said.
Providers like Revenue Science and New York-based Tacoda are using anonymous audience data to help advertisers run campaigns aimed at users exhibiting certain behaviors. This approach allows the marrying of audience data from one group of sites with ad placements on another. For example, Weather.com could show a car ad to surfers who come from Cars.com. That could theoretically solve advertising challenges presented by the existence of sites with small but attractive audiences, like gadget blogs, and others with broad, undefined reach, such as e-mail sites.
Both companies have struck deals with a diverse number of sites to share anonymous audience data to allow ads to be targeted elsewhere. When its data is used for targeting, those sites get a cut.
"What we're seeing here is person-centric marketing, and that's been the Holy Grail of brand advertisers for a long, long time," said Dave Morgan, CEO of Tacoda.
The behavioral targeting field is attracting new entrants and investments. Revenue Science and Tacoda recently closed $25 million and $12 million funding rounds, respectively. Last week, Adknowledge received $48 million in funding to build its behavioral targeting network for small advertisers. Meanwhile, Claria last week said it would sell its adware business to focus on its own behavioral targeting platform.
David Rittenhouse, group media director at WPP Group's Neo@Ogilvy, said he prefers ads tied to Web use rather than demographics or context. "It's based on frequency and recency of behaviors," he said. "That's something that makes them more qualified."
Tying ads to Web behavior was the goal of the 1990s boom-era Internet ad companies DoubleClick and Engage. Yet the newer entrants offer better technology, said VanBoskirk, and the ability to string together enough sites to give campaigns reach. Tacoda has built a network of 3,000 sites that it says covers 130 million Internet users. Revenue Science helps advertisers run campaigns across many sites using its software.
But some see more valuable insights from advertisers' own customer and site data. "That's the proverbial low-hanging fruit," said Scott Howe, general manager of DrivePM, an aQuantive unit that places Web ads based on several targeting criteria. "If someone has interacted with an advertiser or visited the site, they're much more likely to buy again."
Revenue Science's Gossman agrees advertisers' own customer information is valuable, but says using only remessaging would severely limit the reach of campaigns. "You'd never get enough volume," he said.
Perhaps the biggest danger to behavioral targeting is a consumer backlash against Internet tracking. DoubleClick ran into this when it bought Abacus, an offline database provider, and suggested it could match Web browsing habits with personal information—only to back down in the face of a privacy outcry. As more companies enter the space, executives warn that the chances of the tactic getting a bad name again increase. "We have something new and powerful, and there are likely going to be people who abuse it," said Tacoda's Morgan.