Are Retargeting Ads the Future of Online Advertising?

Twitter made headlines in recent months after announcing that it’s going to support retargeting ads. Following Facebook’s lead, Twitter will experiment with using people’s behavior to tailor ads on their network. If the two biggest social networks are doing it, then retargeting ads must be the future of online advertising, right? They have been embraced by the marketing industry and many e-commerce websites, so retargeting ads seem to have a place in the future of online advertising. Here’s what you need to know about retargeting ads, and why you should consider them for your next campaign:

What are Retargeting Ads

Retargeting ads are banner ads on other sites, specifically shown to people who visited your site previously but didn’t buy. Only 2% of web visitors are ready to buy when they visit your site, so the idea is to remain fresh with the other 98% by tracking their behavior and presenting ads when they surf other websites so they’ll come back to your site when they are ready to make a purchase. Some companies have had great success with this strategy. Consumer-package goods company Kimberly-Clark reports that its retargeting ads have a conversion rate between 50-60 percent.

Unlike regular banner ads, retargeting ads are measured in two ways: click-through conversions and view-through conversions. Below are the definitions of both measurements, according to Moz.

• Click-through conversions are any conversions that happen as a direct result of someone clicking a retargeting ad they were served.
• View-through conversions are like assists. They are conversions that are attributed to another channel, like Google AdWords, but these people were at one point served a retargeting ad before that. Another example of this would be someone who saw the retargeting ad, but went back to the website on their own and made a purchase.

How Retargeting Ads Can Help Your Business

Retargeting ads are different from banner ads, and can be helpful to your business because of the better conversion rates. Although Kimberly-Clark is seeing 50-60 percent conversion rates on its retargeting ads, the average for them is .7%. It doesn’t seem like much, but the average conversion rate for a normal banner ad is just .07%, so retargeting ads have 10 times the conversion rate of a normal banner ad!

One reason why retargeting ads have a better conversion rate is because they can be tailored to the visitor, and even more specifically than just showing ads to people who have been on your site before.. For example, visitors can be segmented by what they were browsing. If you ran an online clothing store, people who looked at shirts could be shown different ads from those that looked at pants, so that the retargeting ads are much more relevant to the individual. This segmentation can also include a time factor, where someone searching for travel or concert tickets needs to be retargeted immediately, while someone looking for a new suit can be retargeted later.

Another reason why retargeting ads work better than display ads is because they are reaching people who have already had an experience with your brand, whether that experience is passive interest in your product, a strong intention to purchase a product in your category, or somewhere in between. In this case, retargeting ads can be used to move your visitors through the buying process and to get them closer to making the purchasing decision. Each stage would use a different message or piece of content in the retargeting ad. The person with a passive interest doesn’t want a coupon or a demo, while the person that already knows about your company and is strongly considering hiring you as a provider doesn’t need an ad explaining who you are and what you offer.

Don’t Rely on Retargeting Ads, However

The numbers show that retargeting ads work well for businesses, but they also shows that the idea of retargeting ads doesn’t sit well with consumers. Unless the consumer understands the marketing aspect of it, the process feels invasive as a brand suddenly follows them all over the Internet, showing them ads for the exact same items they browsed through on the company’s website. And it’s the brand that will pay the price for being persistent and pesky, not the third-party ad companies who serve the ads in the first place. The ads can be even more bothersome if the consumer didn’t even put anything in a shopping cart and just was window-shopping online. “Ad fatigue,” as this phenomenon is called, can sometimes be solved by limiting the number of ad impressions a visitor sees per day, but simply reducing their exposure might not be enough for some of the most sensitive consumers.

Overall, retargeting ads are a way to take your banner advertising to the next level of segmentation and specificity.  They can reach people in a way that regular banner advertising can’t. When used appropriately, they can lead to a substantial increase in sales. They aren’t necessarily the future of online marketing for everyone, but for the right companies they could be an effective new addition to your marketing strategy.

Have you used retargeting ads for your business?  Let us know about your experience in the comments!