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Crucial quote: But in one of the first empirical studies of the impacts of behaviorally targeted advertising on online publishers’ revenue, researchers at the

Crucial quote: But in one of the first empirical studies of the impacts of behaviorally targeted advertising on online publishers’ revenue, researchers at the University of Minnesota, University of California, Irvine, and Carnegie Mellon University suggest publishers only get about 4% more revenue for an ad impression that has a cookie enabled than for one that doesn’t. The study tracked millions of ad transactions at a large U.S. media company over the course of one week. That modest gain for publishers stands in contrast to the vastly larger sums advertisers are willing to pay for behaviorally targeted ads. A 2009 study by Howard Beales, a professor at George Washington University School of Business and a former director of the Bureau of Consumer Protection at the Federal Trade Commission, found advertisers are willing to pay 2.68 times more for a behaviorally targeted ad than one that wasn’t. Much of the premium likely is being eaten up by the so-called “ad tech tax,” the middlemen’s fees that eat up 60 cents of every dollar spent on programmatic ads, according to marketing intelligence firm Warc.

stingraycharles 7y ago
It’s important to realize that this way of advertising is definitely important for advertisers, and adds a lot of value to them. It’s just that it’s not visible to publishers. Having said that, 2009 is a long time ago, and I would like to see this study repeated before drawing conclusions about the current ad landscape.
- Quanttek 7y ago
  That's a typo. It's a 2019 paper. See the link elsewhere in the thread
- downandout 7y ago
  Exactly. This study completely ignores the fact that retargeting through the Facebook and Google pixels is highly effective for advertisers. I have run retargeting campaigns with ROAS (return on ad spend) as high as 30x. Without the ability to retarget, advertising revenue at both Facebook and Google would plummet. The majority of conversions for advertisers come from retargeting (behavioral) campaigns. Advertisers run cold traffic campaigns (non behavioral) just to be able to cookie a group of users interested in their niche of product or service. They then show a different set of ads to those that clicked on the initial ad and met some behavioral criteria - for example they read to the bottom of the landing page or watched more than 1/2 of a sales video. It is this second set of ads that results in most conversions from new customers. So the entire model falls apart if we lose the ability to run retargeting (behavioral) campaigns. Most advertisers lose money on cold traffic campaigns, and make up for it with behavioral campaigns. When behavioral advertising stops, so does non-behavioral, and the whole Facebook and Google house of cards comes crumbling down in a hurry.
  - sockpuppet999 7y ago
    I'm not sure exactly what I'm reading here but , I'm trying to understand. Please excuse me okay? Im gonna ask you an honest Question and I would like an honest answer okay? How do you feel About using your work to spy on ppl 24 hours a day. How do you feel about that? Do you feel it's okay because of others doing it Do you have Any reservations About this ?? I'm not trying to be An asshole here okay? I'm honestly interested in what you( As an informed person) thinks about these issues?
    - travisjungroth 7y ago
      How can you call showing a group of people who clicked on an ad a second ad “spy[ing] on ppl 24 hours a day?”.
      - luckylion 7y ago
        You need to constantly track them to be able to show them ads.
        downandout 7y ago
        No, you don’t. When I put a Facebook pixel on a landing page, Facebook doesn’t tell me who they are or where else they have been, and I have no idea what they do on any site other than my own. I setup a campaign at Facebook that says “show this ad to everyone that spent more than 30 seconds on my landing page”. Facebook then shows my ad to only to those people if and when they return to Facebook (or Instagram). That is the entire extent of retargeting campaigns. Comments like yours are nothing more than fear mongering. Unless you have installed malware on your computer, nobody is “constantly tracking” you.
        luckylion 7y ago
        > When I put a Facebook pixel on a landing page, Facebook doesn’t tell me who they are or where else they have been, and I have no idea what they do on any site other than my own. You are not constantly tracking them, Facebook is. I understood the parent comment to be aimed at Facebook, not some individual advertiser.
paulsutter 7y ago
The average cookie doesn't belong to a high-value segment, explaining why the average benefit is limited. Of course Mercedes wants to reach people shopping for a BMW and will pay substantially more for it. They are paying extra to reach a small subset of users. No conflict here at all
- zrobotics 7y ago
  But are targeted ads worth more? Yes, if I'm shopping for a BMW then Mercedes definitely wants to advertise to me. However, targeted ads don't seem to work as well as Google/Facebook would like advertisers to think. Mercedes can just advertise if I'm searching duckduckgo for BMW, rather than pay to advertise to me for 2 months after I bought a BMW. Note that this is how targeted advertising currently works, I see ads for products I have already purchased, which is just wasted money.
  - manigandham 7y ago
    They work great for first-party networks like Facebook and Google. They just don't pay out well for 3rd-party publishers.
  - godelski 7y ago
    While I agree with a lot of what you said (Mercedes can just pay for keyword searches on BMW or similar to still target and be effective with cheaper and "old school" methods). But I don't think a lot of the advertisements for already purchased products is wasteful. See Coke (and what follows is overly simplified). Everyone already knows who they are and their opinions on them. You might ask "Why does Coke advertise?" and it'd be a good question. Sriracha doesn't and they are a household name, surely Coke has more standing than them. Coke advertises not only to influence you from a young age (getting new generation of coke drinkers) but to ensure that you associate a good feeling with your purchase. This is apparent in car commercials too (especially in America). That BMW commercial isn't to convince people to buy a new BMW, kinda ridiculous when you think about it and the money that you have to spend on a car like that (consider how often you see commercials for high end cars that the general public can't afford). Luxury car makers sure do want you to feel superior about your decision to buy their car though (which there's connection with "my next car will be X so I'm superior). Compare this to McDonalds, who knows you'll be hungry soon and wants you to visit them for your next meal. These companies have different goals, and of course their advertising will be performed in just as differing ways. Not all advertising is the same. Though I'm not sure this is the best strategy for Amazon when I buy a deck of cards, I don't need 20 more types. But maybe it is effective and that's why they keep doing it.
manigandham 7y ago
There is no "ad tech tax". It's called a supply chain. The end product costs more than the raw parts in every industry. The issue for publishers here is lack of scale, no cookies, and 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids when they do happen.
- mattkrause 7y ago
  More to the point, revenue doesn’t include expenses, so it doesn’t matter that the targeted ads cost more....
- slips 7y ago
  It seems disingenuous to compare something abstract like advertising to the process of adding value in manufacturing. They are concepts in two different classes.
  - munchbunny 7y ago
    I don't think it's disingenuous. The advertiser is willing to pay a lot more for the ad after the extra tech is added on. That's a pretty clear case that the extra tech makes the same ad impression more valuable. I don't agree that it's value add since the advertiser pays the publisher directly, and the advertiser then slaps on all of the extra bells and whistles, so the impression isn't modified to be more valuable before it gets to the advertiser. However, the comparison is not disingenuous. Even though I disagree with the parent poster, there is a clear perspective where the two are comparable.
- reallydude 7y ago
  There is some confusion about what a "publisher" means. A publisher is either an SSP (a platform where publishers are aggregated by flat contract fee on a time or traffic basis with guarantees) or a singular site. > There is no "ad tech tax" That is correct. You might get better revenues (as a publisher) dealing with SpotX (an exchange) over say...Viant (a reseller who acts as a publisher to SpotX), but probably won't do better on volume, which directly correlates to payout. Then again, SpotX may not pay you as much for your average demographic and volume as Viant, who wants your business more than SpotX. None of this is supply chain. The chain is not a chain, but more of an amalgam of situations that is affected by the market, as much as personal relationships. Conceptually, an ecosystem where anyone can consume from anyone (as a publisher) and feed from anyone (as an exchange). > The issue for publishers here is lack of scale You don't know that. In 2009, the economy was still recovering and ad-tech had been slapped hard in 2008, leaving banner ads at fractions of the previous years. They have slowly floated down a few more cents to where they are today, primarily due to better targeting, ad fraud, video, mobile browser support, and clickbait (er native) ads. > no cookies This was the comparison that led to the 4% revenue bump. If platforms do not pay forward to the publishers (because why bother, the platforms set their own cookies anyway), it suggests that publishers shouldn't bother with targeting. That's exactly what has happened. No platform consumes publisher targeting data in arbitrage, because it might be faked. Using something like Zvelo for context and your own cookies, you get a much better view of the client. > 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids Whatever "high bids" or "full price" means here, is nebulous. How an exchange decides to run auctions is often negotiated up front but is, ultimately, black box. What this has to do with publishers is confusing. Publishers rarely get paid off what the platform makes. You sign an order for a set period of time or slice of impressions unless you have traffic that is hundreds of thousands per day (an exeedingly small number of sites). In the case where you run a Real Time Bidding auction (header bidding), you might make some variable money. It's rare and wasn't even seen in the wild (ie IAB) till well after 2009. See this more recent breakdown: https://www.emarketer.com/content/why-tech-firms-obtain-most-of-the-money-in-programmatic-purchases https://www.emarketer.com/content/why-tech-firms-obtain-most...
mobjack 7y ago
The money could have been eaten up by the advertiser. If the untargeted ads lead to less valuable placements, then it will hurt the revenue of the advertiser. Short term, both the ad network and publisher can get away with bad placement and make the same amount of money. It will take longer for the advertiser to see the loss in conversion and reduce their spend accordingly.
4ntonius8lock 7y ago
I find this quote very odd. I mean, 4% advantage in a winner take all economy can be the difference between boom and bust. How strange would it be for me to write the same article, wondering why elite athletes go through all the trouble they do to get an 'only 4% advantage'.
SmokeGS 7y ago
well that's what happens when you launder dark money with the info gathered
- RandoNetDenizen 7y ago
  Exactly. If the public justification for a behavior doesn't actually make sense and the behavior continues then there's probably another private motivation which is being satisfied.
sjg007 7y ago
I think statistics wins here vs collecting and computing everything. Google has search intent so as long as you keep searching for something you are still interested. Same with Amazon. FB is more demographic based. I mean I guess you Google could just retarget you in every search query or in gmail but you might be off put when you get BMW ads when you search for vitamins. I've been retargeted by Amazon on FB but it's been pretty comical. Those ads have largely stopped so my guess is that Amazon did not find a positive ROI.
- hammock 7y ago
  Search intent (behavioral) and demographic both suck compared to contextual. Contextual advertising is the "premium" ad space sold directly by publishers. An car maker says "I want to be in Car + Driver" and they put their ad there and it's the most expensive type of buy but it outperforms everything else by a wide margin. The reason "targeted" ads exist is not because they work better, but because they create more inventory that would otherwise not have been sold.
  - sjg007 7y ago
    I mean that is obvious. Here you own the market basically. Your competition is other content providers.

stingraycharles 7y ago

It’s important to realize that this way of advertising is definitely important for advertisers, and adds a lot of value to them. It’s just that it’s not visible to publishers. Having said that, 2009 is a long time ago, and I would like to see this study repeated before drawing conclusions about the current ad landscape.

Quanttek 7y ago
That's a typo. It's a 2019 paper. See the link elsewhere in the thread
downandout 7y ago
Exactly. This study completely ignores the fact that retargeting through the Facebook and Google pixels is highly effective for advertisers. I have run retargeting campaigns with ROAS (return on ad spend) as high as 30x. Without the ability to retarget, advertising revenue at both Facebook and Google would plummet. The majority of conversions for advertisers come from retargeting (behavioral) campaigns. Advertisers run cold traffic campaigns (non behavioral) just to be able to cookie a group of users interested in their niche of product or service. They then show a different set of ads to those that clicked on the initial ad and met some behavioral criteria - for example they read to the bottom of the landing page or watched more than 1/2 of a sales video. It is this second set of ads that results in most conversions from new customers. So the entire model falls apart if we lose the ability to run retargeting (behavioral) campaigns. Most advertisers lose money on cold traffic campaigns, and make up for it with behavioral campaigns. When behavioral advertising stops, so does non-behavioral, and the whole Facebook and Google house of cards comes crumbling down in a hurry.
- sockpuppet999 7y ago
  I'm not sure exactly what I'm reading here but , I'm trying to understand. Please excuse me okay? Im gonna ask you an honest Question and I would like an honest answer okay? How do you feel About using your work to spy on ppl 24 hours a day. How do you feel about that? Do you feel it's okay because of others doing it Do you have Any reservations About this ?? I'm not trying to be An asshole here okay? I'm honestly interested in what you( As an informed person) thinks about these issues?
  - travisjungroth 7y ago
    How can you call showing a group of people who clicked on an ad a second ad “spy[ing] on ppl 24 hours a day?”.
    - luckylion 7y ago
      You need to constantly track them to be able to show them ads.
      - downandout 7y ago
        No, you don’t. When I put a Facebook pixel on a landing page, Facebook doesn’t tell me who they are or where else they have been, and I have no idea what they do on any site other than my own. I setup a campaign at Facebook that says “show this ad to everyone that spent more than 30 seconds on my landing page”. Facebook then shows my ad to only to those people if and when they return to Facebook (or Instagram). That is the entire extent of retargeting campaigns. Comments like yours are nothing more than fear mongering. Unless you have installed malware on your computer, nobody is “constantly tracking” you.
        luckylion 7y ago
        > When I put a Facebook pixel on a landing page, Facebook doesn’t tell me who they are or where else they have been, and I have no idea what they do on any site other than my own. You are not constantly tracking them, Facebook is. I understood the parent comment to be aimed at Facebook, not some individual advertiser.

paulsutter 7y ago

The average cookie doesn't belong to a high-value segment, explaining why the average benefit is limited. Of course Mercedes wants to reach people shopping for a BMW and will pay substantially more for it. They are paying extra to reach a small subset of users. No conflict here at all

zrobotics 7y ago
But are targeted ads worth more? Yes, if I'm shopping for a BMW then Mercedes definitely wants to advertise to me. However, targeted ads don't seem to work as well as Google/Facebook would like advertisers to think. Mercedes can just advertise if I'm searching duckduckgo for BMW, rather than pay to advertise to me for 2 months after I bought a BMW. Note that this is how targeted advertising currently works, I see ads for products I have already purchased, which is just wasted money.
- manigandham 7y ago
  They work great for first-party networks like Facebook and Google. They just don't pay out well for 3rd-party publishers.
- godelski 7y ago
  While I agree with a lot of what you said (Mercedes can just pay for keyword searches on BMW or similar to still target and be effective with cheaper and "old school" methods). But I don't think a lot of the advertisements for already purchased products is wasteful. See Coke (and what follows is overly simplified). Everyone already knows who they are and their opinions on them. You might ask "Why does Coke advertise?" and it'd be a good question. Sriracha doesn't and they are a household name, surely Coke has more standing than them. Coke advertises not only to influence you from a young age (getting new generation of coke drinkers) but to ensure that you associate a good feeling with your purchase. This is apparent in car commercials too (especially in America). That BMW commercial isn't to convince people to buy a new BMW, kinda ridiculous when you think about it and the money that you have to spend on a car like that (consider how often you see commercials for high end cars that the general public can't afford). Luxury car makers sure do want you to feel superior about your decision to buy their car though (which there's connection with "my next car will be X so I'm superior). Compare this to McDonalds, who knows you'll be hungry soon and wants you to visit them for your next meal. These companies have different goals, and of course their advertising will be performed in just as differing ways. Not all advertising is the same. Though I'm not sure this is the best strategy for Amazon when I buy a deck of cards, I don't need 20 more types. But maybe it is effective and that's why they keep doing it.

manigandham 7y ago

There is no "ad tech tax". It's called a supply chain. The end product costs more than the raw parts in every industry. The issue for publishers here is lack of scale, no cookies, and 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids when they do happen.

mattkrause 7y ago
More to the point, revenue doesn’t include expenses, so it doesn’t matter that the targeted ads cost more....
slips 7y ago
It seems disingenuous to compare something abstract like advertising to the process of adding value in manufacturing. They are concepts in two different classes.
- munchbunny 7y ago
  I don't think it's disingenuous. The advertiser is willing to pay a lot more for the ad after the extra tech is added on. That's a pretty clear case that the extra tech makes the same ad impression more valuable. I don't agree that it's value add since the advertiser pays the publisher directly, and the advertiser then slaps on all of the extra bells and whistles, so the impression isn't modified to be more valuable before it gets to the advertiser. However, the comparison is not disingenuous. Even though I disagree with the parent poster, there is a clear perspective where the two are comparable.
reallydude 7y ago
There is some confusion about what a "publisher" means. A publisher is either an SSP (a platform where publishers are aggregated by flat contract fee on a time or traffic basis with guarantees) or a singular site. > There is no "ad tech tax" That is correct. You might get better revenues (as a publisher) dealing with SpotX (an exchange) over say...Viant (a reseller who acts as a publisher to SpotX), but probably won't do better on volume, which directly correlates to payout. Then again, SpotX may not pay you as much for your average demographic and volume as Viant, who wants your business more than SpotX. None of this is supply chain. The chain is not a chain, but more of an amalgam of situations that is affected by the market, as much as personal relationships. Conceptually, an ecosystem where anyone can consume from anyone (as a publisher) and feed from anyone (as an exchange). > The issue for publishers here is lack of scale You don't know that. In 2009, the economy was still recovering and ad-tech had been slapped hard in 2008, leaving banner ads at fractions of the previous years. They have slowly floated down a few more cents to where they are today, primarily due to better targeting, ad fraud, video, mobile browser support, and clickbait (er native) ads. > no cookies This was the comparison that led to the 4% revenue bump. If platforms do not pay forward to the publishers (because why bother, the platforms set their own cookies anyway), it suggests that publishers shouldn't bother with targeting. That's exactly what has happened. No platform consumes publisher targeting data in arbitrage, because it might be faked. Using something like Zvelo for context and your own cookies, you get a much better view of the client. > 2nd-price auctions, meaning they don't get enough high bids and don't get the full price for those bids Whatever "high bids" or "full price" means here, is nebulous. How an exchange decides to run auctions is often negotiated up front but is, ultimately, black box. What this has to do with publishers is confusing. Publishers rarely get paid off what the platform makes. You sign an order for a set period of time or slice of impressions unless you have traffic that is hundreds of thousands per day (an exeedingly small number of sites). In the case where you run a Real Time Bidding auction (header bidding), you might make some variable money. It's rare and wasn't even seen in the wild (ie IAB) till well after 2009. See this more recent breakdown: https://www.emarketer.com/content/why-tech-firms-obtain-most-of-the-money-in-programmatic-purchases https://www.emarketer.com/content/why-tech-firms-obtain-most...

mobjack 7y ago

The money could have been eaten up by the advertiser. If the untargeted ads lead to less valuable placements, then it will hurt the revenue of the advertiser. Short term, both the ad network and publisher can get away with bad placement and make the same amount of money. It will take longer for the advertiser to see the loss in conversion and reduce their spend accordingly.

4ntonius8lock 7y ago

I find this quote very odd. I mean, 4% advantage in a winner take all economy can be the difference between boom and bust. How strange would it be for me to write the same article, wondering why elite athletes go through all the trouble they do to get an 'only 4% advantage'.

SmokeGS 7y ago

well that's what happens when you launder dark money with the info gathered

RandoNetDenizen 7y ago
Exactly. If the public justification for a behavior doesn't actually make sense and the behavior continues then there's probably another private motivation which is being satisfied.

sjg007 7y ago

I think statistics wins here vs collecting and computing everything. Google has search intent so as long as you keep searching for something you are still interested. Same with Amazon. FB is more demographic based. I mean I guess you Google could just retarget you in every search query or in gmail but you might be off put when you get BMW ads when you search for vitamins. I've been retargeted by Amazon on FB but it's been pretty comical. Those ads have largely stopped so my guess is that Amazon did not find a positive ROI.

hammock 7y ago
Search intent (behavioral) and demographic both suck compared to contextual. Contextual advertising is the "premium" ad space sold directly by publishers. An car maker says "I want to be in Car + Driver" and they put their ad there and it's the most expensive type of buy but it outperforms everything else by a wide margin. The reason "targeted" ads exist is not because they work better, but because they create more inventory that would otherwise not have been sold.
- sjg007 7y ago
  I mean that is obvious. Here you own the market basically. Your competition is other content providers.