How retargeting is turning advertising on its head

Thanks to algorithms that track online behaviour, companies can now target their audience more accurately. But what does this mean for publishers?

Ever notice how products or offers you’ve viewed on one website are increasingly following you around to other corners of the web?

It’s called retargeting, and it is part of an increasing trend of using algorithm-based systems to program ads for web users.

Digital advertising is growing at 16 per cent year-on-year, according to a new survey by the Interactive Advertising Bureau of Australia, with general display ads, such as banner ads on websites, growing at over 22 per cent. According to consultancy PricewaterhouseCoopers, online advertising overtook free-air-television as the dominant channel in the last year at $4 billion a year and it is expected to grow to $5.8 bn by 2018, while other formats -- like newspapers, magazines and outdoor advertising -- are forecast to remain static.

As ad spend increasingly shifts online, so the number of agencies offering programmatic trading has increased, that is conducting real time auctions on available web inventory to ensure that ads are served to the customers marketers actually value, rather than to eyeballs they don’t. According to Tim Whitfield, operations director at Xaxis, one of Australia’s largest programmatic providers, there are 19 billion auctions per month involving machine algorithms bidding for specific inventory based on the data collected about you, the user, all in the instant the website is loading. IAB Australia chief executive Alice Manners says that media buyers are suggesting that 15 to 20 per cent of spend will be allocated to programmatic trading.

Ad retargeting provides the clearest example of how that works. 


“Take a company like Clinique,” says Adam Berke, president of US-based retargeter AdRoll. “If someone has put an eyeliner in their cart, we are willing to bid a very high CPM (cost per thousand impressions) on [subsequent] sites with high-quality inventory. If you are going to spend a dollar on advertising, spend it on someone who’s been to your site and looked at your products.”

For publishers however, the rise of programmatic trading initially led to grave concerns about a race to the bottom in terms of advertising yields. After all, if I can target the same customer with the same ad on the next site they go to, why would I pay premium rates at a major publisher, when I can get much cheaper inventory elsewhere?

In Australia, that has been less of an issue where a highly concentrated media market works very well for the system. The danger of programmatic advertising for a marketer is that the customer might be served that ad for Clinique eyeliner on a site which contains offensive content.

“Brand safety concerns are key,” says Tim Whitfield of Xaxis. “One way to ensure that is to align with a premium product”. By premium, Whitfield means established players like News Corp (publisher of Business Spectator), Fairfax, Mi9 and Yahoo, where experienced editors have vetted the content on the page. With an estimated 80 per cent of the audience covered by the major players, Whitfield says that Australia is “on the forefront of programmatic because it is the perfect Venn diagram of advanced users with high broadband speeds and a smaller number of publishers.”

For publishers, who formerly had to offload excess inventory cheaply, programmatic allows them to create much more focused segments of their audiences and gain a higher price. Many are setting up private exchanges where bidding takes place. The holy grail for publishers with particularly high-end readers may be to clip the ticket on customers after they have left the site.

“The traditional model is getting turned on its head via audience extension,” says Adam Berke of AdRoll. “The fact that a reader is looking at stories about investing is monetisable. A publisher can turn to a company like Fidelity and say, ‘let us target them on our finance section for one price, create a segment of them and retarget them when they leave our site and go anywhere else’. For publishers, it’s another way we can generate revenue and monetise our audience.”