Behavioral Advertising: Targeting Growth

I was doing some market research and found an eMarketer report on the forecasted growth for behaviorally targeted advertising. Behavioral targeting is when you target online consumers based on their past behavior rather than the current page they're on (contextual targeting), and is generally considered to be a segment of the display advertising market. As you can see from the below graph (courtesy of moi), search advertising (contextual targeting) has been responsible for the continued erosion of display advertising market share.

This was derived from a forecast of US online advertising spending by format, combined with some IAB press release data. Some of the other relevant data points I determined regarding display vs search were:

• Revenue -- search generated $81.65 in revenue per 1000 searches (in 2007), compared to display at $1.99 per 1000 page views. Display continues to trend down, with 83% of display ad volume sold at less than $1 CPM.
• Volume -- display generated 25x more page views yet earned half the market share.

As I said before, display advertising and CPM rates have to stage a comeback, and I think behavioral targeting will be a driving factor. eMarketer tends to feel the same way -- in fact, they say explicitly "Internet advertising is no longer all about paid search. Targeted online display advertising is exploding. Spending for Internet advertising with a behavioral targeting component will soar from $575 million this year to $1 billion in 2008, and that still represents only 11% of the US display, rich media and video market."

Here are three reasons why I believe behavioral will grow relative to contextual:

1. The % of Web page views that don't have very good context is growing. Think about all the user-generated content with poor context -- and this inventory is cheap!
2. Behavioral targeting helps marketers reach those with at least some interest, and reach that audience with fewer impressions, than the typical "spray and pray" model of advertising.
3. User behavior is getting easier to capture. Online users are publishing their thoughts, interests, and affinities more freely than ever.

This said, the behavioral targeting market has several major obstacles to growth -- scale, ease of implementation, and privacy/perception issues.  But that's another post!