Targeted Advertising
Have you ever faced a situation where, after having discussed something with your friends, you start to see it advertised on social media? Special service tricks or magic you say? No, it's actually targeted advertising, an extremely useful tool for finding customers.
Let’s go any further into details to understand how targeted advertising works.
What is Targeted Advertising?
Targeted advertising is one of the key tools for improving your marketing indicators. The concept "Targeted advertising" comes from the English word "Target", which means "Target, Goal, Aim". Targeted advertising covers social media users that are interested in a service or a product. Put simply, targeted advertising allows advertisers to show their ads to a very specific category of users.
What is the difference between Targeted and Contextual Advertising?
is advertisement on Instagram, Facebook, Twitter etc. When you launch this type of advertising you set up specific settings for users, such as their interests, education, age and sex. With a successful advertising campaign this advertisement reaches the right target and corresponds to the interests of the audience.
is advertisement on Google Ads, Bing Ads and their partner websites. Users begin to see the advertisements after entering in the search box a particular web search query similar to the subject of your advertisement. Customers that come from contextual advertising are considered "hot" as the ads are displayed to them "in the right place at the right time", increasing their relevance to the maximum.
The main difference between Targeted and Contextual Advertising is in the way in which the target audience is segmented. Context uses the keywords that users enter into the Google or Bing search box while target uses user information.
How does targeted advertising work?
Where do social networks and other platforms get so much information about the user, is it actually legal? The answer is simple - yes, it is, because all this information you have filled out yourself when first creating your profile. Remember the moment of creating your account, for example, on Facebook. There you specified your interests, marital status, age, sex, city. And if you add your location to that list, it will be easy to figure out if you’re a traveler or a homebody. If you often travel to different countries, you are more likely to have a relatively flexible work schedule and a high income.
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Geographic
Place of visit, place of stay, residence. For example, Facebook Ads allows to display ads within one kilometer radius of your office. It will be very useful for advertisers who consider a passersby as a potential customer.
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Demographic
Among the most evident characteristics first of all there may be age, sex, education level, economic status, nationality, employment and income level. For example, advertisements for clothing and souvenirs with university logo should be shown to students in their final year by choosing the "Final Year" indicator in detailed targeting. Maternity clothes should be shown to a female audience under 40.
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Behavioral
They are determined by user’s recent actions on the website, browser history, purchases etc. For example, the user has been recently exploring the best mortgage/loan offers as he was planning to take out a loan or has just bought a new laptop.
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Psychographic
Interests, lifestyle, opinions, attitudes, values. If the user often goes to music concerts and is subscribed to several music bands, there is a high probability that he is a music fan.
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Time
Days and/or hours of service. For example, a restaurant may promote business lunch at lunchtime, various events and live music concerts in the evenings and special program for clients with children at the weekend.
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Technical
Characteristics of customer’s devices. For example, if your business is focused on upper-middle-income users, you may find it useful to target more expensive users’ devices, such as Macbook and iPhone.
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Look-Alike
Sometimes business owners know their target audience very well and narrow it down as much as possible. In such cases, social media begins to offer client search that is similar to the target audience of the business. This technique is called look-alike.
Are our conversations overheard for personalizing advertisements?
Most people that use mobile devices at least once in their lives have wondered "Is it possible for them to overhear our conversations?" Instagram and Facebook apps, for example, have expressed their suspicions many times online. But people tend to look for matches. If you see an advert of a medicine for a headache or indigestion after Christmas, it has nothing to do with the fact that you have recently complained to someone, close to your phone, about having too much champagne or getting sick at a holiday dinner. Experienced advertisers usually consider the seasonality and cyclicality of requests and launch ads with a large audience reach.
Here’s another simple example, which helps to find a simple explanation of the fact that targeting ads, based on overheard conversations, is nothing more than common user suggestions. You could be walking by a restaurant, talking to a friend on the phone and mentioning that you are passing by it at the moment. Your phone, with Wi-Fi turned on, continuously scans available networks in automatic mode and tries to connect to routers within the range. So, passing by, your phone tried to connect to the Wi-Fi router of the restaurant, no action was required from you, and at the moment of the connection attempt your phone transmits its technical ID to the router, by which you can be further recognized during the targeting of ads.
After having walked 500 meters, having finished talking to your friend and having opened your Facebook or Instagram feed, you immediately see the banner of the restaurant you mentioned in the conversation with your friend. Oh no, you’ll say, my conversations have been illegally overheard by social media and are used for personalizing ads. But actually it’s much easier, nobody bugged you, you provided your personal information yourself, when you passed by that restaurant where your phone automatically tried to connect to the Wi-Fi network and left a digital trail as a MAC address on the router. Further, your digital trail was targeted because the advertiser was targeting his advertising campaign according to the digital trail of all social media users that passed by his restaurant. This example clearly shows that there is no conspiracy against you, but it’s also hard to call it a coincidence as you left your digital trail yourself as you were passing by that restaurant with your Wi-Fi on.
There is no point for big companies to risk users’ confidence and their reputation in order to personalize advertisements based on illegally bugged information. Sooner or later this would lead to billions and billions of dollars in class action suits. The developers of operating systems should not be accused of illegal use of users’ personal data for targeting ads as well as all their actions are controlled by terms and conditions and there is no suggestive fact to prove the opposite at this time. In addition to that we need to think about the non-profitability of the whole process, such as collecting, analyzing and storing billions of illegally gathered user information, and there are already more available tools such as retargeting which can be used to achieve the desired result completely legally and without having to store and process billions of terabytes of suspicious data.
Technically it is quite simple to set up a trap-and-trace, but to make it work the owner of the mobile device has to give permission for access to the microphone; without the user’s permission the apps installed on the phone won’t have direct access to the microphone. Moreover, the phone will record a huge number of different phrases while recording the surroundings, so without context it will be nothing more than some noise, that will hardly help personalize the advertisement, on the contrary, it will make it ineffective.
Based on the foregoing, we can sum it up and state with complete confidence that the illegal process of overhearing user conversations is risky, economically unprofitable and carries the risk of losing users’ confidence and the reputation of the company, so it is just a myth created by attentive social media users that look for coincidence everywhere and in everything.
How much does Targeted Advertising cost?
Firstly, the cost of targeted advertising depends on the competition at auction, and secondly, the price is influenced by many other factors. There are different payment models for targeted advertising. The most popular of them is CPC (Cost Per Click), then comes CPM (Cost Per Mille - pay per one thousand impressions). But there are many other models, so let’s analyze each of them.
CPA (Cost Per Action) - cost per action (registration on the website, purchase of goods, adding an item to the cart, ordering a service, etc.). Not to be confused with CTA (Call To Action).
CAC (Customer Acquisition Cost) is the final cost per customer. Every successful business checks this value, as it is very important in calculating ROI.
CPO (Cost Per Order) is the cost per order.
CPI (Cost Per Install) - the cost per installation of a mobile app. Not to be confused with KPI (key performance indicators).
CPL (Cost Per Lead) - cost per lead.
CPV (Cost Per View) - cost per view.
CPF (Cost Per Follower) - cost per follower.
Unfortunately it is impossible to pay the same for the attention of middle-class managers and CEOs of large corporations.
Competition at auction determines the cost of advertising. The more advertisers target your audience of interest, the higher will be the cost of 1.000 targeted actions. The clickability of an ad has a direct impact on its cost, the more clicks the advertisement gets, the less you will pay for them.
It is better to choose a cost per action model where you set the cost yourself, this way you can keep control over the highest possible cost per action.
Let’s give an example of how to calculate the cost of your advertising. If your company sells cheap cosmetics, you can target a female audience between the ages of 16 and 60. But if you have a premium brand that is sold in certain cities, the cost of advertising rises because it narrows the target audience. And if your audience happens to be vegans that care a lot about the composition of the products, the cost of 1.000 targeted actions becomes incredibly high.
Advantages of Targeted Advertising
- Quick launch. Creating a simple advertisement does not take much time, usually less than 30 minutes. It may take another hour or so to be verified by the moderators.
- Useful for the customer. If a social network user has been searching for the best offer for months and then receives a recommendation from a social network with a suitable option, the user is satisfied and accepts the offer.
- Allows you to steal the competitor’s audience. Setting up the right targeting for your business’s competitors and making a better offer can steal these customers away. This is not illegal, by the way, because competition breeds quality!
- Available to small business. A lower entry threshold allows for even small business to use targeted advertising. All you need to have is 10 euro to launch an advertising campaign.
- Analyzable. If the ads you launch do not bring the desired results, you can analyze your target audience, find out who is really interested in your business and adjust the audience. Launching A/B testing, using different versions of ads will help to select best ones based on reliable data, reducing the cost of 1.000.
- Works even if there is no social media page or website. The possibility of creating an advertisement form where the clients will be offered to enter their details, eliminating the need for the clients to go to a website or a social media page.
- Only your audience will know about you. Appropriate ad set-up allows to show ads only to the customers that are interested in your product and most likely to be willing to buy them. For example, if you place a promotional post hosted by a blogger, even if his blog has the same topic as your business, you won’t be able to hit the target so precisely, because of the diversity of the blog’s audience.
- Brings you closer to a familiar audience. You can set up ads only for people that are already involved in your business in some way. For example, some time ago they made a purchase from you, subscribed to your newsletter or simply visited your website.
- Ad personalization. Targeted advertising allows you to select your audience according to its hobby, students of a certain university, residents of the same area of the city. By using all this data in advertisements it becomes much easier to attract the potential customer’s attention.
- Powerful analytics. Detailed data about the effectiveness of a particular advertising campaign is automatically converted into convenient tables in your advertising account. It completely avoids the necessity of manual data collection and also allows you to export the tables in a convenient format.
Disadvantages of Targeted Advertising
- Requires constant intervention. In order not to waste the budget you need to keep a constant eye on the cost of 1.000 targeted actions and adjust your ads if the cost begins to rise. You should also consider that the audience gets used to the ads that have been viewed more than once, losing more and more interest in them each time, so you need to think up new ads and test them all the time.
- Testing has to be paid for. It takes a lot of time and money to find the right strategy, to make mistakes and to test the adverts.
- Uses personal data. There is no doubt that for business owners collecting personal customer data is an obvious advantage, nevertheless many users see it as an invasion of their privacy and a breach of confidentiality. In the face of all this type the major social networks have decided to give their users the possibility to turn off data collection about them. The lack of personal data increases the cost per click and reduces the effectiveness of ads for the advertiser and the users view completely useless and irrelevant ads.
- It requires an understanding of what you are doing. Generally speaking, targeted advertising can hardly be described as complicated, but professionalism and attention are required to deal with a large budget. So, if you are not experienced in launching targeted ads, but you’re planning to work with a large budget, we highly recommend you to contact the experts of Wake Up Italy SRL for help.
- Dealing with a cold audience. You need to consider that reaching the right audience that will be interested in your product is possible only if you set up your advertising campaign properly, but without experience there is no guarantee that you will succeed. Users do not use social networks to view ads, so your ad needs to be very unusual and interesting in order to motivate them to click on it in order to perform a targeted action.
When is Targeted Advertising not suitable?
Even such a powerful tool as targeted advertising is not suitable for all advertisers.
Targeted advertising platforms’ policy forbids displaying ads for the following topics: psychic ads, ads for erotic websites, ads for drugs, tobacco and alcohol.
Doctors and beauticians may also have difficulty with targeted advertising because it draws a lot of attention to a person’s body, and social media does not welcome it.
B2B companies, as well as companies offering expensive products, will not be able to launch a successful advertising campaign without patience and a large budget. They will have much more difficulty reaching their audience; for example, it will be much easier to target a woman that uses beauty products than the head of a middle-class agricultural company in Brindisi. In addition, because of a very narrow audience, the cost of the targeted action will be much more expensive.
You need to compare the specifics and scale of your business with the scale and specifics of social networking. For example, if your company owns a bar in a business centre and no one, except the employees of the business centre can reach you, it makes no sense to launch an advertisement. Even if people like your offer, there is no way to get it.
If there is nothing that matches your company then targeted advertising can be very effective in developing your business.
Where to order Targeted Advertising?
Contact the highly qualified experts of Wake Up Italy and we will analyze your business, find the best strategy to launch targeted ads and increase your sales.
