To Target or Not To Target?
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Is ad targeting all it's cracked up to be?
ClickZ has an interesting piece on the question of whether targeting specific groups of people through Web advertising will net a better return on investment (ROI) than advertising without targeting.
Larry Braitman, vice president for business development at Flycast Communications, writes about his company's method for measuring the ROI of ad campaigns, called the "Rule of Ratios." It states that any increase in the cost of buying ads should be offset by an increase in the results achieved. For example, if a $5 CPM buy nets a 1% response and the CPM is then bumped to $25, a 5% response would be needed in order to maintain the ROI (1/5 = 5/25).
Although the article focuses on content-based targeting, the same principles apply to any targeting method, including viewer profiles, time of day, and so on, he says. The complete article is available here.
In many cases, Braitman concludes, it doesn't make sense to begin a campaign in a high CPM environment and then sit back and hope your ads do well. It is far more cost-effective to start off advertising on smaller sites at lower CPMs, then begin the testing and learning process. Marketers must try promising new targeting methods and technologies, he writes. But ultimately, they will insist that any investment for additional targeting pay dividends.