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The Cost of Retargeting

Posted on 8.29.2010

With so much talk these days about privacy concerns on the Web, one of the biggest questions facing advertisers and retailers right now is, How much is too much? Specifically with regard to the rapidly developing field of personalized retargeting, at what point do Internet marketers start doing themselves more harm than good by clearly displaying their knowledge of consumers’ purchase histories, browsing habits, salary range, geographic location and shoe size?

Invasion of privacy?
More and more, consumers are noticing that online ads are becoming increasingly personal, and, some say, intrusive. Most seasoned Web shoppers have come to accept some degree of online tracking by marketers, as the practice of retargeting is by no means new. After users visit a retail or commercial Website to browse or shop, it has become commonplace to expect some form of customized advertising content as a result of the cookies that are enabled when the Web browser lands on the site.

But with more companies offering increasingly advanced solutions in a crowded and competitive field, retargeting is quickly becoming a precision-based science. Rather than simply seeing an influx of automobile ads while using the Internet to browse for a used car, now many consumers are finding that they cannot casually view a product without being followed everywhere on the Web by the same style, size and price point of the item – if not by ads for the exact product if they chose not to buy it initially. In addition, shoppers may find themselves inundated with ads from the retailers nearest to them that carry the product or similar items because of the emergence of geolocation technologies, as well as ads that make clever use of any other personal data that Internet users have divulged along the way.

A marketer's dream
This degree of personalization is considered a major development in the e-commerce industry and many retailers are clambering to adopt the latest solutions from providers such as Criteo, ChoiceStream, FetchBack/GSI Commerce, Strands Recommender, Venda and many others, eager to take advantage of this seemingly open passageway into the consumer data vault. But retailers and merchants must first determine if this kind of marketing will, in fact, help sell more product – because the answer is not quite so simple. Not yet, at least.

From a marketer’s standpoint, it’s easy to view today’s retargeting strategies as providing a service to consumers. Who in their right mind wouldn’t prefer advertisements that are relevant to items in which they have previously shown an interest, and relevant to other aspects of their lives, than to advertisements that have no relevance to their lives at all? From a seller’s perspective, it’s the no-brainer of all no-brainers. But what we are seeing right now is that consumers may not be quite ready to accept, much less adopt this particular service. And, at least for the near-term, merchants and advertisers have to be careful not to alienate consumers with too bold or too intrusive retargeting efforts.

The issue of privacy is foremost on the minds of most Internet users right now, and the prevalence of Web advertisements that basically state that a consumer’s online information is anything but private is fairly distressing for many people. Where this type of marketing crosses the line between ineffectual and potentially damaging is in the delivery of that statement, to the point where a marketer may not only lose a sale but also a customer if it is too brazen.

A losing combination
A 2010 study by two marketing professors, Ari Goldfarb of the University of Toronto and Catherine Tucker of MIT, found that tailoring plain text ads to the content of a website proved to be an effective strategy for increasing purchase intent. The same was found to be the case for increasingly visible but less targeted ads. So, a customer browsing a shoe retailer’s site would be positively influenced by a plain text ad pertaining to shoes in his or her size, for instance, and also by a more visually striking but less personalized ad for a different product altogether.

However, the study found that the purchase intent actually decreased when these two strategies were combined, meaning that a highly targeted, personalized and visually obtrusive ad had the opposite effect of its intention – it actually drove the consumer away. Goldfarb and Tucker attributed this result to the interpretation that the more visible targeted ad was an invasion of the privacy of the consumers in the study, boldly broadcasting the fact that their data was available to marketers all over the Web.

Drawing the line
This study shows that until consumers can become more comfortable with the concept of personalized retargeting, this is where marketers and retailers have to draw the line between personal and too personal. It seems that what the consumers in the study are saying is that relevant, personalized information might be helpful toward influencing a purchase, but it becomes an invasion of privacy the more visible advertisers are in their presentation. This mindset will likely fade away over time, but today’s merchants have to be cautious in the meantime.

One way of doing that is by looking very carefully at all of the methods and practices utilized by the different retargeting technology companies and advertising firms. It is still a developing field and there are no best practices to speak of, but by the same token, innovations are being made every day. Criteo, for instance, has a feature in which it explains to consumers why they are receiving certain ads if they click on a link. In today’s privacy-sensitive climate, it will be attempts at transparency such as this one that appeal the most to consumers – and have the most long-term benefits for marketers and merchants.


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