In the US, behavioral targeting is used to reach people who are 'in market'. Their intentions are 'inferred' based on observed relationships between online behavior (site visits, search terms, clicking on links) and later purchases (confirmation pages). It's very popular in the US and growing in popularity elsewhere.
But behavioral targeting won't happen quickly in China for one major reason. Even as China's internet population has soared at a world-leading pace, Chinese ecommerce has not kept up. Why is this important? To find the links between early-stage online behavior and eventual purchase, you need to be able to observe the purchase and tie it back to the individual's past online behavior. With all but a tiny share of purchases happening at retail, there just isn't enough purchase data to get the job done. And with ecommerce representing a small part of the revenue picture for most companies, there's no way to measure how well behavioral targeting works.
So, without an easy connection between online exposure to ads and eventual online purchase, buyers tend to fall back on familiar solutions to ad placement, such as time-based pricing. Why pay more for behavioral targeting when you can't be sure it's working?
Advantages of China's online advertising market
China does have some interesting advantages when compared to other online advertising markets.
Ironically, the absence of ecommerce means that display advertising is seldom evaluated purely on the basis of its ability to generate immediate click-through. Marketers know that major sites attract enormous traffic, and that they need to be where there customers spend their time. So while other markets have seen deterioration in pricing and perceived value of online ads in the past two years, even as the quantity of available inventory continues to grow, China's display network remains relatively orderly. In addition, tracking and measurement are less restricted in China than in many countries, and so technology can be used to more effectively target messages to people without necessarily interrupting or degrading their online experience.
Beyond behavioral
Fortunately, there are more kinds of targeting than just behavioral. Given its reliance on offline purchase and the geographic diversity of its economy, China will require targeting that is more based on demographic and geographic factors than behavioral ones. Right now, online targeting in China is mainly done by selecting media properties and placements based on their demographic characteristics. Marketers want to reach men, or high income people, or young people, and they look for advertising options that appeal to their target audience. The process is analogous to television or print buying.
But more technologically sophisticated ways of targeting are becoming available to the Chinese market, and offer much greater precision and efficiency. First of all, a host of ad networks have launched in China. Some, like AdChina, offer sophisticated targeting capability based on behavior, geography, history of viewing the company's ads, etc. Some portals, such as Tencent, have made investments that, when combined with the data they collect from registered users, allow advertisers to create custom segments, or even target people at the individual level. So advertisers can feel confident that their ads are reaching people who have the characteristics of a buyer and who live in an area where their products are sold.
But for targeting to pay its greatest dividends, advertisers need to be able to measure the effect their ads have on purchase. To do that in China requires marrying online ad delivery data with offline purchase behavior. And to do this, a company needs to implement a customer relationship management (CRM) solution, and integrate it operationally with their online marketing program. CRM companies like Acxiom are working with forward-looking players like AdChina and Tencent to make measurement and attribution easy to implement, so that marketers can measure the contribution online media is making to their sales, and scale their media investments accordingly.
Here are some examples of marrying targeted online communication with offline measurement:
1. Send known, opted-in individuals email and SMS messages based on recent purchase history or site behavior.
2. Show display ads in specific metropolitan areas using IP data, and measure the lift in results for that geography to estimate the contribution of ads to sales.
3. Retarget website visitors based on their onsite behavior with display ads that reflect their recent visit with special, trackable offers (promotion codes, coupons).
4. Target known customers with display ads using cookies set during website visits or when emails were opened that link to their customer record.
Marketers or their service providers are beginning to establish 'cookie databases' so that they can target their customers and prospects in every online environment and measure effectiveness. And CRM companies as well as ad networks will build pools of addressable, demographically recognizable individuals for optimized ad/message delivery.
Michael Gorman is vice-president for global digital strategy at Acxiom Corporation.
