Business

Web Ads That Know Too Much

Ads that follow you from one website to another are increasingly common, but in the rush for more tailored advertising, age-old wisdom may be lost.

Online advertising is the foundation of many business models on PCs and mobile devices.

All over the Web, ads are getting more personal. They follow you from one site to the next and know your browsing history. But are such ads really effective? The answer may not be as obvious as digital marketers assume.

“There’s been a focus on trying to identify the customers likely to purchase a product. But that’s distinct from which customers will be influenced by advertising,” says Catherine Tucker, an MIT Sloan School of Management professor who gave a keynote address at an international data mining conference in February.

In the rush to use ever-more data about people, Tucker says, ads are too often shown to those who have already decided whether to buy or not buy the product, or who have bought it already. “What we may be doing is wasting a lot of money.”

Tucker has focused her studies on the growing number of personalized ads. In an experiment with an online travel firm, for example, she saw that ads tailored to a specific browsing history were, on average, less effective than generic ads for the site when shown to people who had recently visited. “You’ve been to the website and looked at the products. There’s probably a good reason why you didn’t buy it,” she says. This is akin to an age-old marketing maxim—“timing is everything”—that Tucker says is being lost in the digital age.

In 2012, companies in the U.S. spent nearly $2 billion to buy online display advertising through real-time bidding platforms, according to eMarketer. These platforms allow algorithms to strike split-second deals about which ad to show a person as his or her computer loads a web page, a negotiation that often takes the ad recipient’s browsing history into account.

The practice of serving ads that match past online behavior, generally called “retargeting,” is growing more important for many online businesses, which are making increasing use of fine-grained data about products or pages that a person has viewed or searched. Last month, even Facebook said it would allow marketers to retarget ads in people’s News Feeds based on their browsing history. Advertisers have also begun tracking people across different devices they use (see “Get Ready for Ads That Follow You from One Device to the Next”).

Advertisers say there is no question that retargeted and highly personal ads work, says Kip Voytek, director of digital innovation at the marketing firm MDC Partners, but are also aware that there is room to refine their approach. Generally, they must work within digital ad buying options available from Web publishers and technology providers, which have been slow to evolve.

Tucker doesn’t advocate dropping the practice of retargeting. She just says that marketers may need to get smarter, for instance by showing a personalized ad for a product, like a sneaker, only once a person has indicated, through browsing, that he or she may be back in the market to make a purchase. Even showing a retargeted ad by filtering how long ago a person last visited a site is a piece of information not often used today. A person who visited an online flower shop is more likely to buy flowers the following day, not two weeks later. On the other hand, a car company may have more time to influence a shopper.

Meanwhile, technologies that track ad performance are getting better. For example, Anindya Ghose, codirector of New York University’s Center for Business Analytics, cites a startup called C3metrics that is perfecting ways to track not only people across multiple devices, but also to track their “engagement” with mobile ads by determining whether they scrolled down far enough to even see it, or whether they hovered their mouse over the ad on a webpage.

With all of the money involved, and marketers needing to be convinced that mobile ads are also effective, ads will surely continue to make smarter and smarter predictions. More than simply follow you around the Web, they may also know what you actually want to buy.

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