Companies use targeted advertising to ensure that their ad campaigns will reach the eyes of the correct audience. Businesses looking to boost the effectiveness of their marketing strategies should consider making it part of their advertising plans.
What is Targeted Advertising?
Targeted advertising is a type of paid online advertising in which advertisers designate certain audience characteristics that they would like to reach with an ad campaign.
Whether we recognize it or not, we are constantly encountering ads from the moment we wake up every day.
The amount of advertising people see has only grown over time. Consumers were exposed to far fewer ads in the past — 5,000 per day in 2007 and between 500–1,600 in the 1970s.
In 2021, it was approximated that the average person saw between 6,000–10,000 advertisements daily.
This may seem unfathomable. However, consumers are constantly being presented with advertisements in different places, including:
- Print ads
- Direct mail ads
- Social media ads
- In-app ads
- Banner ads
- Search engine ads
- Product placement
- Podcast ads
- Television or streaming service ads
- Radio ads
With all of this information making contact with consumers, it can be nearly impossible to stand out. However, companies that effectively connect with the right audience have a better chance at success. Targeted advertising can help businesses get their message across to those who matter to them.
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What Can Companies Target with Ad Campaigns?
Companies can input traits of their desired audience into paid advertising platforms to connect with users that match their preferences.
Pretty much any consumer trait can be targeted including demographic information such as:
- Age group
- Educational background
- Generational information
Note: Meta will be implementing new targeting restrictions, which will limit the scope of ad targeting on their platforms. This change will take effect in March 2022.
However, targeted advertising can also cover zip code, household income, consumer behaviors, personality traits, lifestyle choices, and general interests. Paired with basic demographic targeting, this added layer of value-based data can make targeted advertising feel spookily accurate in meeting user needs.
Not to mention, this commitment to accuracy really works. Despite any nervousness consumers may feel about encountering such individually-tailored ads, people are more likely to make purchases through targeted ads.
The Network Advertising Institute found that targeted advertising generated 270% more revenue than non-targeted counterparts.
How Does Targeted Advertising Work?
We know that targeted advertising effectively gets ads to the right audience, but just how does that process work?
There are many ways to execute a targeted ad campaign, depending on your company’s resources and budget. Many companies lean on cookies and social media for direct pathways to targeted advertising.
Cookies Generate User Data
You’ve probably had to accept cookies while surfing the web before. When you click “Accept”, you're authenticating the server to create cookies with data packets and send them back to your device.
Then, cookies are stored on the user's device. Companies use these cookies to track how people navigate their site. This allows companies to highlight key behaviors and align them with user demographics and preferences.
Privacy laws such as GDPR exist to promote data protection, which impacts how cookies can be used by companies.
Social Media Sites Collect Data and Target with Ease
It’s no secret that big tech companies such as Meta and Google have been collecting user information for years, generating large volumes of in-demand data for advertisers.
These companies leverage user data by offering targeted advertising services of their own. Social media and search engine advertising make targeting easy on marketers, allowing companies to select demographic and behavioral traits when creating a campaign.
After advertisers make these selections, the ad is distributed to users who fit the audience group requested.
For instance, Secret DC aims to connect adults in the Washington DC area through local events. This locally-focused organization doesn’t want its ad appearing to just any Facebook user — they’re looking for young professionals in the D.C. area who enjoy socialization, nightlife, and adventure.
To isolate this small portion of the Facebook user base, the company likely invested in targeted advertising on the Facebook site itself, allowing them to target people in the DC area who would most enjoy Secret DC services.
While upcoming changes to Facebook’s ad policy may impact the level of targeting done here, companies will still be able to narrow the scope of who ads target.
Is Targeted Advertising Ethical?
The quick answer: not always. With the rise of cookies and user data in advertising, many consumers feel that digital advertising has become invasive.
Experts state that it isn’t difficult for targeted advertising to push consumers out of their comfort zone. They won’t trust you if your ads follow them from platform to platform, appearing a little too tailored to their browsing.
There have also been plenty of instances where minority groups are discriminated against through targeted advertising, creating even more reasons for consumers to find these ads unethical.
The goal should always be to improve the buyer experience for your customers, not to scare them away with creepy levels of over-personalization that result from their user data. Digital ethics is now a pervasive conversation in online advertising because of the innumerable ways marketers can overstep.
Companies must show a sense of respect for their consumers if they wish to keep their trust. Targeted advertising can be beneficial, but you should regularly evaluate your strategies to ensure they come off as helpful rather than invasive.
To learn more about how to create ethical targeted ad campaigns, read ‘Ads that Don’t Overstep.’
4 Targeted Advertising Examples
There isn’t just one way of conducting a targeted advertising campaign online. Here are four examples of how companies zoom in on a desired audience group while gearing up for their next campaign.
- Google Ads Offer Tons of Targeting Options
- Third-Party Data Helps Companies Target
- Cookies Send Data Back to Companies
- Social Media Ads Offer Flexibility
1. Google Ads Offer Tons of Targeting Options
It’s estimated that there are about 5.6 billion search queries performed per day via Google, so it’s no surprise that the company has the targeting capabilities to reach just about anyone.
Google’s remarkable reach is proven in its audience targeting guidelines for advertisers — companies can segment their ideal audiences into pre-configured groups on Google Ads.
The options include affinity segments (user interests), life events (ex. marriage, graduation), in-market segments, custom segments, auto-created custom intent segments, remarketing, and detailed demographics.
Google likely offers the greatest diversity of options when it comes to segmenting an audience into groups, allowing for targeted advertising efforts that are just as effective as they are strategic.
2. Third-Party Data Helps Companies Target
Third-party data is a huge player in digital advertising and audience targeting. It’s popularity isn’t surprising given the amount of control it gives companies with the budget to afford it.
Not all companies collect data in huge volumes. . However, some third-party companies — such as OnAudience, Oracle, Adobe, and Nielsen — broker giant datasets of user information to other companies for business purposes.
That means that one data broker may service many players in one industry, all working off the extensive lists of user data relevant to the space.
While paying for data like this may be appealing, there are also inherent risks associated with the reliability and ineffectiveness of third-party data, resulting in loss of spend that could’ve been reallocated to a different method of targeted advertising.
3. Cookies Send Data Back to Companies
4. Social Media Ads Offer Flexibility
One of the huge draws of social media is that content is creative, visual, and available in a variety of formats. One social platform may offer posts, stories, banner advertisements, and more.
Take Facebook, for instance. The platform offers a significant amount of flexibility regarding how an ad will look, what content it will include, and where it will be displayed on the platform — that’s in addition to all of its audience targeting options.
On Facebook, a company can also add “Like Page” or “Shop Now” buttons to make the buying experience even smoother for consumers.
Paid Ad Glossary: Top 25 Terms to Know
Looking to jump into the world of paid advertising? Brush up on these PPC industry terms to sound like an expert in your paid ad journey.
- Audience segmentation: the separation of your target audience into smaller groups based on demographic or behavioral characteristics
- Behavioral targeting: the process of leveraging user data to discover what kinds of content best appeal to audiences as well as encourage purchases
- Bid: the most money an advertiser (bidder) is offering to spend per click on a given ad
- Call to action (CTA): a sentence or phrase that directly encourages consumers to do something, oftentimes asking them to make a purchase
- Campaign: several advertisements that all contribute to the same goal or idea, all appearing thematically similar
- Click-through rate (CTR): the number of clicks on an ad divided by the total number of impressions
- Contextual targeting: the process of showing ads on sites with very similar or compatible themes
- Conversion rate: the number of conversions via an ad divided by total interactions with the ad
- Cookies: small files stored on users’ computers that contain user data and browsing activity information, which companies can use to understand their audiences
- Cost per click: paid advertising metric that reveals the average expense for each click on an ad
- Cost per impression: paid advertising metric that measures the cost to advertisers each time their ad is viewed
- Cost per lead: performance-based advertising metric that measures the cost-effectiveness of an ad’s ability to obtain new leads
- Cost per mille (CPM): performance-based advertising metric that tracks the cost of an advertisement for every thousand interactions
- Display ads: large-scale, highly visual ads that can take the form of banners, text, animations, and/or traditional images
- Geotargeting: targeting an audience based specifically on their location
- Impression: the number of times an ad is shown
- Look-alike audiences: audience groups that share similar characteristics to existing customers — companies seek them out to widen their reach with ads
- Native ads: paid advertising content that appears to fit in with the host publication’s style and/or tone
- Opt-In: when an audience chooses to receive or partake in something — often associated with sign-ups and email marketing
- Personally Identifiable Information (PII): any information that reveals an individual’s identity — this data can be either private or public information
- Predictive bidding: process that uses data and models to forecast consumer engagement and conversion potential to generate the right price of a bid for an ad placement
- Reach: total number of people who see an ad
- Real-time bidding: the instantaneous process of buying and selling ads per impression
- Retargeting: the practice of using ads to target those who visited a company website before but did not convert
- Return on advertising spend (ROAS): a common advertising KPI that determines the amount of money earned for each dollar spent during an advertising campaign
Does Targeted Advertising Make Sense for Your Business?
There are plenty of major benefits of targeted advertising: increased ROI, the ability to make data-driven decisions, and the confidence that your ads are connecting with the right audience.
However, those benefits come at the risk of audience distrust and the potential for serious ethical dilemmas. Companies on the fence should look closely at the different types of targeted advertising opportunities on various platforms to see if they can find a strong fit.