Behavioral Retargeting: Effective for Retailers but Controversial for Consumers

Have you ever looked at a product online, decided not to purchase it for one reason or another, then gone to another site only to see the product you just looked at featured in a banner ad? Chances are you have. This tactic, known as behavioral retargeting, has proven to be one of the most effective marketing tools for online retailers.

Behavioral retargeting can be used both on a retailer's website (on-site targeting) as well as off-site (network targeting). Here's how behavioral retargeting works from a technology standpoint:

Retailers place cookies on consumers' computers, enabling them to track their behavior as they move across the web. The cookie data is passed onto a server responsible for behavioral retargeting. The server hosts anonymous visitor-specific data, including but not limited to type of page visited (e.g., product page, checkout page), time spent on a page and purchase history. Retailers can use this data to create profiles of visitors, then segment ads customized to their behavior.

Behavioral Retargeting for Retailers

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It's understandable how behavioral retargeting could be effective. In fact, industry research has shown that behavioral ads consistently outperform contextual ads when it comes to click through and conversion rates. That's why retailers are fighting to keep behavioral retargeting a viable marketing option.

In addition to their effectiveness at capturing valuable consumer data, retailers argue that cookies serve other purposes such as data theft protection and analytics. Furthermore, they argue that consumers want more relevant online advertising, with a majority willing to provide personal information in exchange for personalized content.

But there's opposition to tracking consumers' behavior online.

Mozilla has flirted with the idea of blocking third-party cookies by default in its Firefox 22 web browser in an effort to protect users' privacy. The Federal Trade Commission (FTC) has gotten involved in the debate with the introduction of the Final Privacy Framework Report to outline guidelines on how marketers can and can't use consumer data gathered online. Two of the advertising industry's self-regulatory commissions, the Network Advertising Initiative (NAI) and the Digital Advertising Alliance (DAA), have both seen a significant increase in membership over the last few years.

Consumer and privacy watchdog groups have gone on record in their opposition to behavioral retargeting. Groups such as the Center for Digital Democracy, Electronic Frontier Foundation and Consumers Union have joined forces to push for legislation that hinders or eliminates the ability of online marketers to track consumers' behavior online for the purpose of targeting them with advertising. The groups argue that sensitive information should not be collected or used for behavioral retargeting, noting that such data could be used to discriminate against people and affect their credit, education, employment, insurance or access to government benefits.

I tend to side with retailers on this issue.

If the data is anonymous, not being shared with third parties and being leveraged to generate more relevant advertisements, behavioral retargeting is a positive in my mind. Consumers are served up ads that are more likely to be of interest to them and retailers get an online marketing tool that produces a positive return on investment.

What are your thoughts on this controversial topic? Leave your comments, questions or concerns on BuyerZone's Facebook page and I will answer them!

Joe Keenan is the managing editor of Retail Online Integration and eM+C, two B-to-B trade publications.