Online display advertisers stand at the gateway to a revolution

The principle behind retargeting is simple. If you visit a retail site and leave without buying something, retargeting technology will serve you an ad for that retailer or the product or service you were looking at on another site. And the returns for the advertiser are dramatic. Speaking to New Media Age recently, fashion retailer All Saints revealed it had generated £21 for every £1 it had spent on retargeted advertising. As a result, retailers such as Game, Boden, Karen Millen, John Lewis and French Connection are embracing the approach. According to New Look’s ecommerce performance marketing manager Rav Dhaliwal, it’s the company’s fastest growing performance channel.

Mention the word “targeting”, though, and consumers’ hackles can rise. Previous targeting technologies have proved controversial, and research by TNS confirms the long-standing prejudice against them, and reiterates consumer desire for better, more useful web advertising. According to figures published last summer, 64% of people think ads tailored to their own tastes and interests are a good idea, but 65% think targeted advertising is an abuse of their privacy.

The problem is the gap that exists between how people think they’re being targeted, and how the technology actually works. This was the case for the wave of behavioural targeting companies that entered the market a few years ago, promising to use information derived from people’s online browsing to deliver them more relevant ads. One company in particular, Phorm – which collected data about people’s browsing habits at the ISP level – acted as a lightning rod for privacy concerns, and eventually pulled out of the UK market.

The industry’s response, co-ordinated and delivered primarily through the Internet Advertising Bureau, was to try to explain that the data used was anonymous and couldn’t be tracked back to individuals. Research showed that once people understood this, their acceptance of the technology increased dramatically and other forms of behavioural targeting, operating at site and ad network level, have continued to grow in popularity with little in the way of customer complaint.

Retargeting companies such as Criteo and Struq have learned the lessons from this experience. All their ads carry an icon that, when clicked on, takes the user to a site that explains retargeting and offers them a chance to opt out.

There is concern in the industry that these same lessons may take longer for advertisers to adopt. All the evidence so far suggests that retargeting is a technique that requires care in its application, and which can rapidly show diminishing returns. Capping the frequency of the ads, and respecting that a consumer’s likelihood of returning to purchase an item diminishes with time remain vital.

The Institute of Practitioners in Advertising has called for immediate research into consumer attitudes to retargeting in response to anecdotal evidence that people are concerned about ads “following them around the web”. But there are also suggestions that privacy concerns may be overblown. Just before the recent boom in retargeting, Mark Finney, ad manager of client sales at Guardian News and Media, told me he couldn’t recall the publisher receiving a single complaint related to privacy concerns around online advertising.

Worries about consumer acceptance of retargeting should also focus on other areas. There are more reasons for people abandoning shopping carts than just changing their mind about a prospective purchase, a key one being problems with the sales process. If online retailers are going to start retargeting, they need to be certain their checkout stage is flawless because little is going to annoy shoppers more than being asked to return and buy an item that they failed to purchase only because of flaws in the retailer’s site.

Away from the details of its execution, retargeting is the latest step in the implementation of data to online display advertising. In the early part of the last decade, search advertising grew at the astonishing rate it did because Google found a way to replace context with intent as the parameter by which advertising was delivered.

That approach is now being applied to online display. Advertisers like it because it increases effectiveness and reduces waste. Media owners like it because it allows them both to use that inventory more efficiently and charge more for it. And that’s just the beginning of the story. The co-founder of one interactive media agency told me recently that he expected more change in digital display in the next four years than ever before. If search is anything to go by, we’re on the brink of a revolution.