Targeting online ads – the early morning fog has yet to clear

Using technology to target online ads is not a new idea, but that doesn’t make it a bad one. An interview in e-consultancy’s daily briefing yesterday with Paul Cook of PositiveFeedback got me thinking about this topic and it seems to me that this market might be about to have it’s time.

PositiveFeedback is a firm that provides targeting tools for online retailers and their ad agencies.

I took two things away from the interview:

The realisation that many sites haven’t been ready for ad targeting until now – to get value out of targeting ads you need to be measuring ad performance and have a well designed site. Many companies are only getting to that point now, and in this context it is important to remember that a lot of targeting can be done manually – technology is only required to squeeze out the last bit of extra yield – so ad optimising technology hasn’t historically made it to the top of people’s priority lists.
There is a lack of clarity on the uplift in converstion that targeting will bring. On the one hand in the interview Paul Cook says 10% is a reasonable target for most websites, and on the other we have Glen Drury of Yahoo UK saying in the Sunday Times that they get 56%.

This makes it sound like an early market to me. Only starting to get to the top of the priority list for customers and disagreement on the benefits available. If it is an early market the obvious next question is how big it will be. My gut tells me there is a lot to go after here – particularly as the amount of low CPM inventory keeps rising as social networks grow in popularity.

So far companies in this market have generally had a difficult time. Advertising.com (in which we invested when I was at Reuters) has been an exception, and they achieved success by using their optimisation technology to arbitrage play, buying on CPM and selling on CPA.

There are signs that things might be chaning though – Revenue Science looks like it is making good headway, Wunderloop is a very interesting company in this space with some interesting backers, as is Tacoda, and finally Ominture bought UK behavioural targeting business TouchClarity earlier this year.