A new study by Advertising.com found that behavioral targeted ads produce lower response rates than run-of-network placements, but deliver higher conversion rates.

The study examined three advertiser campaigns targeted to Advertising.com's personal finance, automotive and education behavioral populations. For each advertiser, identical creative messages were sent to both a run-of-network audience and the behaviorally segmented audience. In each study, conversion rates increased markedly for targeted impressions vs. run-of-network impressions. However, click-through rates experienced the opposite effect -- with the number of clicks decreasing for targeted impressions. These findings suggest that behavioral targeting actually increases the value of each click, as consumers who click on a targeted ad are more motivated to convert.

An article on Marketing Vox cites these results for the personal finance category:

"In the personal finance category, behaviorally targeted ads had a click-through rate that was 56 percent below that of untargeted ads, yet they had a 90 percent higher conversion rate."

Sheer brillance!

Let’s say you have 1 million impressions – and let’s say an untargeted ad gets a 1.0% click rate. Then lets say that behavioral ad gets a 0.44% (56% below). That means the untargeted ad gets 10,000 clicks and the targeted ad gets 4,400.

Now they tout that conversion rate is higher. But....If you had a conversion rate of 2.0% for untargeted, and 3.8% for the targeted (90% higher), you get 200 conversions for untargeted, 167 for the targeted. Oh, and they’ll charge you 2-3X as much for the behavioral ads.

They’ve basically told you you’ll get better results not buying their product.

Posted by: Greg Johns at October 26, 2005 04:13 PM