What is Targeted Advertising?

Targeted advertising is a type of advertising designed to reach certain consumers. Targeted ads have been used successfully for decades and are often touted as the most effective way for businesses to reach potential customers. The underlying principle behind this type of advertising is that it is more cost-effective to advertise specifically to the individuals who are most likely to buy a product or service.

There are two main categories of targeted advertising: demographic-based advertising and content-based advertising. Demographic-based advertising is designed to reach a certain category of consumers based on shared traits, such as age or gender. Content-based targeted advertising is generally more tightly directed at consumers with specific interests.

Demographic-based targeted advertising relies heavily on the assumption that certain groups of individuals are, as a whole, more likely to buy certain types of products. For example, even though female hunters exist, hunting is viewed to be a primarily male-oriented hobby. It makes more financial sense to direct ads at males as they compose the majority of the hunting audience.

Changes in societal behavior as a whole have made demographic targeting less effective. Geographical demographic predictability is beginning to crumble as communication and information become universally available through the Internet. The traditional model of a stay-at-home wife and a husband with a 9-to-5 job is commonly seen as antiquated. Improved health care and longer life expectancies have even made age-based demographics more unreliable. In short, finding a “typical” member of any gender, age, or geographic group is becoming more difficult.

Content-based targeted advertising has been commonly used for decades in specialized publications, such as trade magazines and financial publications, but was historically viewed as impractical for wide-spread advertising campaigns. The prevalent use of the Internet, however, has resulted in increased viability of this form of targeted advertising on a large scale. This has happened mainly through the advent of contextual advertising.

In early 2011, contextual advertising became the most common type of advertising on the Internet. The mechanics behind contextual ad placement can be complex, but the premise is simple. Basically, a computer program scans the text on a web page for certain keywords. Advertisements that are related to those keywords are then placed on the page. As the individual reading the web page has already shown an interest in a subject closely related to the product or service being advertised, this type of targeted advertising can be extremely effective.

As effective as it may be, contextual advertising can still be flawed. One problem is the inability of computerized scanning programs to take human sensibilities into account in ad placement. An unfortunate example of this problem occurred on a major news network site shortly following the untimely death of a celebrity. For many readers, the article was accompanied by a large advertisement for life insurance.