Re: online targeting

From: Clint Ballard <clint_at_accelerationsw.com>
Date: Thu, 4 Feb 1999 08:09:15 -0600 (CST)

DOUG BATES WROTE:
>While it's useful to see here the comparative results of
>targeted vs. untargeted online ads, efforts to determine
>through experimentation whether targeted or untargeted ads
>are better seems to me to be a fool's errand. Results should
>be expected to vary widely between audiences, markets,
>products, offers, and creatives. No definitive statement
>can be made. For every marketer, the bottom line is ....
>well ... the bottom line. Are you making money? Regarding
>targeting, this will vary from situation to situation. Each
>offer requires testing to determine what is going to be
>profitable.
>
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

While I agree that the results will vary widely based on the
specifics (see my previous post), saying that "No definitive
statement can be made" is too pessimistic. For instance,
the following would be the starting point: "If the target
audience comprises 1/N of the untargeted audience, then the
value of the targeted advertising is N times the
untargeted." [Linear Valuation of Targeted Pricing: TP(1/N)
= N] The rationale of this theory is that it will cost the
same amount of money to reach the same amount of targeted
people, eg. if the target audience comprises 20% (1/5th) of
untargeted, then it is worth 5 times the premium.

The past result showed that we need to adjust for the
possibility of lower CTR, so we have TP(1/N) = N/2. I just
divided by two since that was the data point (rounded up) we
had. By having more data, we can do a much better job in
determining what the actual divisor should be.

Market pricing seems to follow a dramatically different
curve for targeting, eg. $50 CPM seems to be at the upper
end of targeted prices, so that would mean that the value of
N would be in the neighborhood of 40, or 2.5%. Most
websites that I know of that have audiences that are
significantly less than 1% (N 100), would be happy to get
$50 CPM. Since market pricing is significantly below the
Linear Valuation model (even with the divisor of 2), the
question is what is the compensating factor in favor of
untargeted ads? Are targeted ads a tremendous bargain at
current market prices?

Wouldn't it be useful to be able experimentally determine
what type of curve the market pricing (MP) of the targeting
premium follows, maybe MP(1/N) = LogBase2(N)+1 and if the
Linear Valuation theory is valid, then we can actually
predict the bottom line performance of a targeted campaign
versus the untargeted. We can clearly establish valid data
points for the value and we can obtain pricing data points.
If the pricing curve is different from the value curve, then
people who know the difference will have a tremendous
advantage over people who don't. Of course, before doing
any major buy, you need to establish what the specific
inventory's 1/N targeting is and then with the pricing
information for the inventory, price of untargeted and
performance of untargeted you will be able to predict pretty
accurately which way is better.

Clint Ballard
C.E.O., Acceleration Software, clint_at_accelerationsw.com
"http://www.clicksales.com?oa", pay-per-click advertising with a 100%
satisfaction guarantee


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Received on Thu Feb 04 1999 - 10:53:27 CST