Audience Targeting in Performance Advertising Campaigns
Audience targeting in performance advertising campaigns operates in two distinct phases: prospecting and retargeting.
In the prospecting phase, potential candidates are exposed to ads. If they choose to interact with those ads then determining their progression to the retargeting phase. Retargeting involves re-engaging with prospects through targeted advertisements.
From an advertiser’s perspective, understanding the dynamics of these phases is essential. Conversions during the prospecting phase tend to be more cost-effective than those in the retargeting phase. This is because a conversion from a retargeted candidate implies that the advertiser has already incurred costs during the prospecting phase. However, retargeted prospects are more likely to convert, given their demonstrated interest.
Our Case Study
This study was conducted in partnership with Rain the Growth Agency, a fully integrated performance advertising agency; their client’s goal was to drive consumers to purchase their apparel using digital advertising, and to do so in the most cost-effective way possible. Audience targeting suggests that it’s able to serve the right ads to the right people, regardless of which sites the ads are ultimately delivered on, but we hypothesized that a curated list of high-quality publishers could further improve outcomes, even when combined with audience targeting.
Using ROI to Measure Performance
To gauge the effectiveness of this campaign and its individual phases, we rely on a critical metric: Return on Investment (ROI). ROI is a straightforward formula: (revenue – cost) / cost, or equivalently: (revenue / cost) – 1. This metric can be interpreted as the return (profit considering advertisement costs only) of spending $1 on an initiative.
For example, an ROI of 2 indicates that for every $1 spent, the initiative generated $2 in returns. Maintaining the same ROI, a $100,000 ad spend would yield $200,000 in returns.
Positive ROI values indicate a successful performance campaign, while a very unsuccessful campaign can have a negative ROI. A campaign that breaks even will have an ROI of 0.
Our partner did an A/B test running two audience targeting campaigns. In both campaigns our partner targeted the same audience (“wealthy affluents”). In the treatment campaign, advertisements were blocked if they didn’t occur on DeepSee Best Quality sites. In the control campaign, the advertisement proceeded according to the retargeting platforms recommendation – no blocking. Both campaigns tracked the prospecting and retargeting phases.
The results of the A/B test were striking. In both the prospecting and retargeting phases, the campaign that filtered domains according to DeepSee Best Quality significantly outperformed the control campaign. The prospecting phase boasted an ROI of 3.01, compared to 1.18 in the control group (an impressive ~155% increase). In the retargeting phase, the ROI skyrocketed to 25.30, while the control group lagged at 11.38 (~220% increase).
These findings dispel the misconception that the domain where users are targeted is irrelevant when the focus is on the right audience. It’s abundantly clear that users within the target audience do not convert effectively when exposed to ads on low-quality domains. This is especially evident in the discovery that retargeted users, who are the most likely to convert, generate significantly higher returns when exposed to retargeted advertisements on DeepSee Best Quality channels.
A counterintuitive finding is that for this campaign, DeepSee Best Quality inventory was actually a better value compared with including all inventory: the treatment campaign had an overall CPM of $11.71 v.s. $16.25 (~28% decrease) in the prospecting phase and a CPM of $6.56 v.s. $9.83 (~33% decrease) in the retargeting phase.