What Is Targeted Advertising?

Elevate your marketing game with strategic, targeted advertising.

Today's small and midsize business leaders find themselves at a critical crossroads when it comes to advertising. How can they enhance the effectiveness of their marketing strategies to capture a custom audience, one that's not only receptive but more likely to convert into loyal customers?

Indirect ad buys, which rely heavily on third-party data, were once the way to go, but with the increase in privacy regulations, marketers are looking for more effective ways to reach their audience, such as targeted ads. According to Gartner's Digital IQ: Digital Advertising Benchmarks for 2022 report, 43% of desktop ad placements were direct ad buys, up from 25% in the year before.^[1]

Targeted advertising holds the potential to revolutionize the way businesses connect with their audience and unlock new success for businesses of all sizes. In this article, we'll attempt to demystify targeted advertising by looking at all the forms it can take and provide some real-world examples and tools to improve your marketing campaigns.

What is targeted advertising, and how does it work?

Targeted advertising uses consumer data to direct advertisements to specific audiences based on their traits, interests, and preferences. This approach to advertising allows businesses to craft and distribute the most relevant ads possible, using analytics related to personal interests, demographics, locations, online habits, and past purchases.

How do targeted ads work? While it varies depending on the type of targeted advertisements and the methods used, here are some of the common steps involved:

1. Data collection and analysis: By analyzing data on user behavior, preferences, demographics, and more, marketers can gain valuable insights into their audience's interests, habits, and needs.

2. Audience segmentation: Customers are grouped by similar characteristics, behaviors, or interests into distinct segments.

3. Message customization: This goes beyond simply addressing recipients by name and involves crafting content, advertisements, and offers that are relevant to each segment.

4. Channel selection: Each online platform has a different audience. To reach segmented audiences effectively, marketers target advertising to channels that they frequent.

5. Measurement, analysis, and optimization: The success of each target ad is measured. Marketers use key performance indicators (KPIs) such as click-through rates (CTR), conversion rates, and return on investment (ROI) to improve targeting strategies.

One question you may be asking is, "Is targeted advertising ethical?" The ethics of targeted advertising hinges on the principles of privacy, transparency, consent, fairness, and the responsible use of data. Ethical advertisers and businesses should prioritize these principles to ensure their advertising practices respect users' rights and values while still achieving marketing goals.

Benefits of targeted ads

In the modern, regulated world of marketing, where every click and engagement counts, it's not just about getting your message out in the world—it's about getting it in front of the right eyes and ears. Here are some of the benefits that come along with targeted advertising.

Deliver personalized ads

Personalized ads give you the ability to speak directly to each of your potential customers and address their unique interests and needs. By leveraging data insights and audience segmentation, businesses can create relevant content that appeals to its audience on a personal level. This personalized approach to advertising improves customer experience and increases the chances of capturing their attention and driving conversions.

Build brand awareness and improve brand perception

Targeted advertising can play an important role in building brand awareness and shaping the perception of a business in the minds of consumers. Targeted ads help create positive associations, reinforce brand values, and differentiate businesses from their competitors. You can craft a narrative that resonates with your ideal customers through strategic messaging and precise audience targeting.

Streamline marketing efforts

Traditional mass marketing approaches often result in wasted resources and ineffective campaigns. Targeted advertising, on the other hand, allows businesses to streamline their marketing processes by focusing their resources on reaching the most appropriate and receptive audience. By eliminating the guesswork and targeting specific demographics, interests, or behaviors, businesses can increase the efficiency of their campaigns.

Leverage customer data to improve ROI on marketing spend

Data is the foundation of targeted advertising, and businesses can use this valuable resource to gain insights into consumer trends, behaviors, and preferences. Targeted advertising not only relies on data but also generates more of it. By harnessing customer data, businesses can refine their strategies, allocate resources more effectively, and achieve a higher ROI.

Types of targeted advertising

Targeted advertising isn't a one-size-fits-all approach. It's a multifaceted strategy that includes various techniques tailored to meet specific marketing goals and audience segments. Here are some of the main types of targeted advertising:

Contextual

Contextual targeting involves delivering ads based on the content or context of a webpage or digital platform. Contextual ad platforms analyze the keywords, themes, or topics on a webpage to determine the most relevant ads to display. When ads are contextually relevant, they feel less obtrusive and more like a natural extension of the content. This can lead to higher engagement rates and a more positive perception of your brand.

Behavioral

Behavioral targeting is a type of targeted advertising that focuses on delivering ads based on user behaviors and actions. By understanding what users do online, such as the search terms they use, their browsing habits, and their other interactions, a business can create custom ad experiences that mesh with their specific preferences and interests. With the data collected, marketers can create detailed user profiles that go beyond simple demographics, allowing them to tailor messaging precisely to what each user is likely to find appealing.

Geotargeting

Location matters with a lot of advertising, and geotargeting leverages the power of geography to deliver precise advertisements based on a user's location. This is a technique that is often used by brick-and-mortar stores that want to reach potential customers in close proximity to their store. It can also be used effectively for event-based marketing to capture the attention of event-goers and drive foot traffic to a specific booth or venue.

Social media targeting

Social media platforms are a storehouse of user data, and social media targeting taps into this wealth of information to deliver highly relevant ads. From Facebook to Instagram, Twitter to LinkedIn, each platform offers unique targeting options to reach the right audience with pinpointing accuracy. Many platforms also allow businesses to create custom audiences by uploading their customer email lists or by using data from website visits to retarget users who have already shown interest in your brand.

Time and device targeting

Time and device targeting allows businesses to refine their ad delivery based on when and where users are most likely to engage. Timing is important in advertising. Time-based ad targeting gives businesses the ability to optimize mobile advertising during lunch breaks and reach desktop users during work hours. For example, advertising breakfast cereal during the morning hours. Device targeting enables them to tailor ad creatives to align with user experiences on specific devices.

Retargeting

If you have ever thought that an ad followed you around the internet, you might be right. You could have been experiencing ad retargeting. This advertising technique focuses on re-engaging users who have previously interacted with a brand but haven't yet converted. By using cookies or tracking pixels, businesses can identify these users and deliver ads designed to remind and entice them to take action.

Targeted advertising examples

Let's explore some real-life examples that illustrate how businesses have leveraged these strategies to reach specific audiences:

• Amazon's personalized product recommendations: Amazon's recommendation engine uses behavioral targeting to analyze your previous interactions with their website and personalize product recommendations to fit your interests.

• Netflix's content suggestions: This streaming platform uses algorithms to analyze your viewing history and preferences to recommend movies and TV shows you might enjoy.

• LinkedIn's job ad targeting: Companies on LinkedIn can precisely target users based on their skills, job titles, industries, and even specific companies where they have previously worked.

• Local restaurant's geotargeted ads: Local businesses often use geotargeted ads to attract customers in their vicinity, enticing them with offers based on their current location.

• Dynamic retargeting by e-commerce stores: Online shopping carts often use dynamic retargeting to re-engage those who visited their site but didn't buy. If you viewed a product in the past, you may see ads featuring the same product on other websites you browse.

Next Steps

To implement targeted advertising for your business, start by collecting data on users. This data can be obtained through various methods, including tracking online activities, browsing history, and website interactions. Then, use this information to segment your audience and create unique advertisements for each audience segment. Then, measure the results and improve on them to streamline your marketing efforts and improve your ROI over time.