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Behavioural advertising is more than twice as good at getting ad-viewers to make a purchase compared to non-targeted internet advertising, but costs more than twice as much, a survey has found.

US advertising network trade body the Network Advertising Initiative (NAI) commissioned the study, which was based on data provided by advertising networks. It was carried out by former US consumer protection official Howard Beales.

It found that ads that were the result of behavioural targeting on average cost advertisers 2.68 times what normal 'run of network' ads did. Run of network (RON) ads are those placed across the entire inventory of websites that an ad network is contracted to provide ads for.

But the study found that behavioural ads were more effective at getting viewers to make purchases, converting 6.8 per cent of viewers into customers of the company which placed the ad, rather than the 2.8 per cent of RON ad viewers that made a purchase.

The figures mean that online publishing companies, whose space is sold to and by advertising networks, earn more by allowing behavioural advertising to take place on their sites.

Behavioural advertising has been controversial because of its use of information about a web user to try to predict which ads it would be best to show them. Systems track a person's web use and use that information to attempt to second guess that person's product preferences.

Privacy activists have objected to some systems, arguing that all behavioural advertising should happen on an 'opt in' basis, and that more obvious notice should be given to web users than just adding a warning to a site's privacy policy.

US advertising trade bodies announced a labelling system last month that they said would warn consumers that an advert was the result of behavioural targeting. No such scheme exists yet in the UK.

“Over the past several months, policy discussion around behaviorally-targeted advertising has lacked a critical foundation, because there had never been an empirical assessment of the value of such advertising to ad networks, consumers, and publishers,” said Beales, who is an economics academic who was once the director of the Bureau of Consumer Protection at US consumer regulator the Federal Trade Commission.

“This study found that behaviorally targeted advertising is a critical component of ad network, publisher, and advertiser success," said Beales. "Behaviorally targeted ads sell for twice the price and offer twice the effectiveness of normal run-of-network ads, significantly enhancing the advertising revenue engine driving the growth of the Internet.”

The NAI study found that publishers can make more money from their online advertising space if they sell it to behavioural advertisers. Full behavioural tracking attracted rates 2.68 times that of RON ads and 'retargeted' ads, where someone is shown an ad for a product they have previously looked at, attracts rates 1.5 times that or RON ads, it found.

Behavioural ads were clicked on 670 per cent more times that RON ads, and achieved a sale more than twice as often as RON adverts.

See: The study (25-pg/266kb pdf)

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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