Friday, 19 December 2008

Why you might not love highly targeted advertising

All this internet ad targeting is brilliant. You can make products pop up on gmail depending on what an email was about, and Facebook keeps trying to sell me motorbike insurance because it knows I need it. Probably something else for you, but that's exactly the point.

The better you target, the higher your conversion to clicks and sales. It's win-win.

Except that it isn't. Not if you sell something low-priced, in a market with several competitors - i.e. everybody who makes supermarket goods.

Imagine a world where ad targeting is perfect. On TV, on the radio, everywhere. It's possible to put your product in front of consumers exactly when they're thinking about buying and persuade them to buy you.

We're not all that far away*, as TV viewing moves online through services like iplayer and kangaroo, why would you show everyone the same copy in each ad break? Come to that, why would you even show the same number of ads?
For advertisers, it will be like buying Google searches - you outbid your competitors, win the slot and win the customer.

In a world like that, some brands would pay an awful lot for an advertising slot. We can already see this on Google searches; bids for high margin items like credit cards and mortgages are way higher than for other categories.

This leaves FMCG marketers with something of a problem. The products they advertise are low-margin and their market is everybody. At the moment, these types of brands that have very wide target audiences can dominate the broadcast media, because broadcast media don't target very well. You hit everybody with your ad, like it or not, and that means a lot of wastage if you sell to a minority of people.

Back to the motorbike insurance example, you never see bike insurance ads on the TV outside of advertising during MotoGP races and even then it's more likely to be sponsorship than in-break spots.
But if motorbike insurance companies could target just the bikers with TV spots, or even better just the bikers whose insurance is coming up for renewal, then they'd pay a lot more than somebody who is trying to sell those bikers baked beans, or frozen ready meals.

In that world, could FMCG brands even afford to advertise on the broadcast media? Wouldn't somebody else always be willing to pay more for the slot?

* OK, so we're really quite far away, but it's fun to speculate about what would happen.

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