Small Business Essentials

There has been a lot of talk lately about Behavioral Targeting in online marketing. According to many sources, it is the most effective method for online marketing, and the spending on this type of advertising is growing quickly. But is this type of advertising right for the small business owner? We’ll examine some reasons of why it may not be.

What is Behavioral Marketing?

According to Wikipedia, behavioral marketing "is a technique used by online publishers and advertisers to increase the effectiveness of their campaigns. The idea is to observe a user’s online behavior anonymously and then serve the most relevant advertisement based on their behavior. Theoretically, this helps advertisers deliver their online advertisement to the users who are most likely to be influenced by them." In English, it means that you are followed around the internet using cookies and displayed ads according to your actions, so you are likely to get airline ads if you are searching for information on popular vacation destinations.

Availability

While contextual marketing programs (such as Google’s AdWords) are widely available, behavioral marketing is only offered by a handful of companies. The two main players offering behavioral targeting are Tacoda and Revenue Science. I have also heard that Microsoft and Yahoo! are in the process of experimenting with beta versions as well. All 4 companies do or will offer an ad network in which you can advertise in. The problem is that in order for behavioral targeting to truly work, you need to advertise on a larger site with a lot of areas of content, or you have to advertise across a network of sites where a user can be tracked across multiple sites. This leaves out the smaller niche sites which many users prefer over the larger portal sites because the smaller sites have more relevant content, and eliminates any long tail marketing efforts.

Costs

Along with the need for advertising on larger sites, you have greater costs. On a cost-per-thousand basis (CPM), you can advertise on many niche sites at rates of around $2-10 per thousand impressions. With the lower traffic counts on niche sites, you may only get one to five thousand impressions per month, therefore keeping your monthly advertising buget under $50 per month. With a larger site however, you could be paying $20-50 CPM on a site that gets 10,000-100,000 hits a month. The difference in advertising costs may not be worth it for your small business just to get 15% more people to pay attention to your ads (Source: eMarketer/Revenue Science).

To compare this with pay-per-click systems, you would have to consider the cost of the chosen keyword. With a lower-cost keyword, a properly written ad, and an excellent landing page, you could be making sales for as low as 5-10 cents per lead. For a high-cost keyword, that number could move up to $5-10 per lead. But you are still only paying for the number of clicks on your ad, not for the high percentage of people who don’t click on ads.

Privacy Concerns

Behavioral targeting is invisible to the end-user, which has raised many concerns about privacy. Many users don’t want to have their information stored and tracked so that they can be delivered ads, or they would at least like to know if a site is engaging in this kind of technology. With current internet privacy scares, end-users might worry about what data is collected and how that data is used, especially when shopping online with a credit card. As privacy groups make these issues into front-page news, engaging in behavioral targeting may create a negative association for your business.

Other Concerns

As with any campaign, you would have to follow your behavioral marketing campaigns closely to gage the user’s conversion rate. While some advertisers have had success with behavioral marketing, others have gotten poor-quality leads that don’t end with a sale.

Behavioral targeting may also be ineffective on computers with multiple users, or for single users with multiple roles. Consider these example in which behavioral targeting would be ineffective, but contextual targeting would work:

• Dad likes fishing sites, and he often does searches for fishing-related gear. These searches go into his history for behavioral targeting. But what if his teenage son gets on the computer and goes to a site for snowboarding? If that site featured behavioral targeting, the teen would be served fishing-related ads. If the site featured contextual advertising or direct buy ads, the teen might be served ads for snowboarding gear or video game systems.
• Suzy works at home as a virtual assistant. She has several clients that she performs various tasks for. For one, she books travel plans. For another, she researches trends in aftermarket car accessories. For yet another, she tracks certain stocks. She might be served behaviorally targeted ads based on these 3 factors, and yet she has no interest in any of these things and would not click on the ads.

When you are looking at behavioral targeting on larger sites, you also have to consider how many sales you can actually handle. For example, NHG Consulting wouldn’t advertise on a large site because, as a service business, we couldn’t handle the influx of clients without radically changing our business model. Businesses that serve local markets, service-based business, and businesses that sell hand-made goods are all examples of poor candidates for large-scale advertising. Finding the money to place an ad on MSN.com might net you a great ROI, but can your company handle a sudden surge of sales and be able to deal with 1,000 more clients in a month? If not, the negative reviews of the company because of poor service would hurt you more in the long run than any gains made by the immediate rush of sales.

Additional Resources

• Behavioral Marketing 101: Defining the Terminology
• Behavioral Marketing Usage Up 60%
• Behavioral Targeting (at Wikipedia)
• The Behaviorally Targeted Ad Audience
• Diversity is Power for Specialized Sites
• How Marketers Hone Their Aim Online
• How to Target
• The Internet Marketing Long Tail Bashes the "80:20" Pareto Principle
• Microsoft wants its piece of behavioral marketing pie
• Net Users Favor Niche Travel Sites
• Put Targeting Control in Users’ Hands
• When Does Behavioral Fail?
• The Wrong Tale: A Checklist for Long-Tail Implementations
• Yahoo Sees Salvation in Behavioral Targeting

In Closing

Behavioral targeting is a great technology with many applications, but it may not be right for small business owners. For our readers, do you use behavioral marketing as a part of your marketing plan? Why or why not? If you use it now, are you getting good results? If not, would you consider it in the future?