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Study: Like it or not, behavioral ad targeting works

They're controversial among regulators and privacy groups, but ads targeted to Web users' habits are notably more effective than those that aren't, a new study finds.

Want to get digital-policy regulator types fired up? Start talking about behavioral ad targeting, the business of serving up digital ads that are fine-tuned to a user's Web surfing habits, and you're sure to get all kinds of wildly varied opinions about privacy and sensitive data.

But a new study from a group called the Network Advertising Initiative, or NAI, claims that behavioral targeting is more than twice as effective as non-targeted ads, and the inventory from behavioral ads is worth double that of their non-targeted brethren. The study found that 6.8 percent of people who click on behaviorally targeted ads turn into buyers, versus 2.8 percent of those who click on non-targeted ads.

"This study demonstrates the increasing significance of behavioral advertising to the economic model supporting free online content and services for consumers, as well as the need for careful consideration of policies that would affect the current online advertising marketplace and the innovation it supports," NAI executive director Charles Curran said in a release.

These are targeted display ads from ad networks, not the different variety offered by Facebook that target ads based on profile data as well as friend list networks. Facebook, which does not have an affiliation with the NAI, made the decision to stop running traditional banner ads altogether when a partnership with Microsoft ran out earlier this year.

Interestingly enough, the group that commissioned the survey has a history of highlighting the cautions and pratfalls of behavioral targeting, not just the upsides. The Network Advertising Initiative is "committed to building consumer awareness and reinforcing responsible business and data management practices and standards," with names like AOL Advertising, Google, Yahoo, and Microsoft on board as coalition members. The new study was authored by George Washington University business school professor Howard Beales, a former director of the Bureau of Consumer Protection at the FTC.

Two years ago, the NAI drafted a set of guidelines called "Self-Regulatory Code of Conduct for Online Behavioral Advertising," in which advertisers were instructed not to track particularly sensitive behavioral attributes like medical and psychiatric history, sexual orientation, criminal victim status, or to target ads to children under the age of 13.

The group supports opt-out clauses for ad targeting, something that has been recommended by the Interactive Advertising Bureau--but some privacy-conscious lawmakers believe they should be opt-in in the first place.