By David Hefendehl

Advocates of behavioural targeting – the ability to deliver specific ad content to users who have previously interacted with a site or sites – are citing it as the next big thing for monetising the internet, with claims that it can deliver up to an 800% return on investment (ROI).

By collecting data on browsing behaviour, searches or clicks an advertising network can display “relevant” ad-funded content to particular individuals. And serving relevant ad content is just as effective, as serving relevant content overall. The reality is that if you are in the market to buy a toaster, then you will be more inclined to click on an advert that offers you something about toasters than on one promising you a free MOT if you buy a new car. The simple rule that “relevance=clicks” in this case is beautifully simple.

And lets face it, advertising is powering the web, so why wouldn’t it be the next big thing? Without ad-spend, few sites could survive, and many of the innovations we take for granted today – Web 2.0, anyone? – wouldn’t be around. While we can never be 100% certain that it works, we do know that used in the right way it certainly seems to be working.

But does it really deliver those levels of ROI? Most ad networks in this market will purchase large quantities of unsold advertising slots. This means the cost per thousand (CPM) goes right down and therefore the cost of serving the adverts is minimal. Installing the necessary tools and tracking will initially be expensive, but this outlay is offset by the relatively high click-through rates and the impression left with the user. In the old days we only measured click through, now we look increasingly at “Ad views”. Most users will see an advert, but, after years of being subjected to punching monkeys or dancing hamsters, they won’t necessarily click on them. However, research has shown that they remember what they saw and the majority will most likely go through a process of “What was that again? Ah, yeah, that was it”, before then typing it into a search engine and converting.

However, one concern levelled at behavioural targeting is that it is invasive and unethical. One of the beauties of the web for advertisers is that data is readily available. The scary thing for users is just how much data is available: analytics tools log data; search engines log data; your ISP logs data; and your computer logs data… and so on. All this is more or less readily available – some for everyone to use – on the net.

Combining all this data can become quite scary for consumers. Say you’re looking for an engagement ring to surprise your loved one, but you share a computer and he/she suddenly gets served a gazillion wedding banners. That might cause suspicion and this could be seen as somewhat intrusive.

However, the main area that has been fuelling the ethical debate is where an ad network acts as a packet sniffer and reads data at the point where the ISP connects the user to the rest of the internet. A packet sniffer is a tool (software usually) that reads every piece of information sent from a users computer into cyberspace, and stores it. This is essentially spyware, just not installed on the users computer but at a point the user has no control over. If users are not offered an opt-in to this, it is certainly unethical.

Despite this, for the advertiser, the positives outweigh the negatives: cheap ad space is filled up with relevant content from your site; and you can expect a very high ROI as the ads aren’t served to everyone just the people you actually want them to be served to. That said, the negatives are generally financial; the relatively high up-front cost to change your code and implement reporting into your analytics tool might prove prohibitive to some. Furthermore, it might be that the ethical questions marks listed above may not fit with your company’s brand image or positioning. In this situation, be true to yourself and you will be happy, even if you have a bit less money in your pocket.

But should you decide you want to capitalise on this trend, you should first ask yourself: is this the right thing for me to be investing in? As with all advertising, driving traffic isn’t always the best solution no matter how relevant it might be. If your site’s usability leaves a little to be desired even the most determined user will have a pain threshold; that overlong flash intro that pleases the chief executive so much might prove too much for many already. The second consideration should fall on the vendor. Can you integrate their solution and tags into your existing web management solution, e-commerce or not? If you can, how difficult will it be to tag all this up and make sure that reporting is accurate.

Once you have gone through all this (and probably a bit more) all you really need to do is make nice banners or text ads. It doesn’t help that you have geared up your site and your banners are a visual hazard for the general population. Flashing and singing banners are not what you want.

The great thing about behavioural targeting is that it can work for brands in every sector; it doesn’t matter whether you sell cars, handbags, flowers or pork chops. If you have a large enough reach to make a mark on other sites – that is unique visitors and potential users – you could look into this. Whatever you decide, behavioural targeting shouldn’t be the only type of advertising you do; what is important is to get the right mix of channels.

And as for expectation… you need to be realistic. The vendor’s sales pitch will always point out the 17 million percent ROI they delivered for client XYZ. Ask yourself if you are this client or even want to be this client. Then set yourself realistic goals.

About David Hefendehl and Pod1

David Hefendehl is the E-commerce Strategist at Pod1.

Based in London and New York independent creative digital agency Pod1 is a 50 strong collective of creative, strategic and technical specialists; all passionate about delivering cutting edge creativity. Established in 2001, the agency creates highly effective ecommerce solutions for its clients, by investing time to understand a client’s business and combining this with exceptional consumer insight. Superior client service and planning underlie every campaign, the customer journey is fully explored, and conversion ultimately achieved.

Pod1’s specialist areas are retail, fashion, travel, and finance with expertise in web design, ecommerce development, Content Management Systems, Intranets and Extranets. The agency is also skilled in online marketing and online strategy solutions, with services including search engine marketing (SEO & PPC), banner advertising, email marketing and campaign micro sites.

Pod1 works with some of the UK’s and the world’s leading brands from an array of industries. They are the UK’s leading agency in the retail space and have an implicit understanding of this sector. Clients include: Marks and Spencer, Myla, Kurt Geiger, Uniqlo, Matthew Williamson, Burton, Jigsaw, Links of London, Barcelo, Kenwood, Net a Porter and Anya Hindmarch.

Founder of Pod1, Fadi Shuman, is also the official ecommerce blogger for Brand Republic and ecommerce expert for .Net magazine.

www.pod1.com