Will Predictive Behavioral Targeting Change Online & Direct Marketing Ways?

Table of Contents

1. Introduction
1.1 Problem Statement
1.2 The Establishment of the Online Advertisement

2. Standard Banner Sizes
2.1 Effectiveness of Special Banner Implementation
2.2. Development of Banner & Co

3. Behavior and Reasons for Internet Users
3.1 Behavior Profile
3.2 Internet Usage
3.3. Study of Users in Social Networks
3.4 Registration Behavior
3.5 Activity Level
3.6 Behavior in Changes of Social Networks
3.7 Acceptance of Online Advertisement on Social Networks

4. Market Share of Online Advertisement

5. Development through Time

6. Direct Marketing Overview

7. Decrease of Transaction Cost

8. Search Engine Marketing
8.1 Optimization of Search Engine Hit Lists
8.1.1 Page Rank By Google
8.2 Process Optimization
8.3 Popularity
8.4 Product Information
8.5 Company’s Information
8.6 Quality of the Content
8.7 Internationality
8.8 Additional Information

9. Personalization

10. Payment Methods for Search Engines

11. Banner Advertisement Definition
11.1 Banner Advertisement Payment Possibilities

12. E-Mail Marketing Definition
12.1 Different Forms of E-Mail Marketing
12.2 Payment Methods of E-Mail Marketing

13. Affiliate-Marketing Definition
13.1 Advantages of Affiliate-Network

14. Personalization
14.1 Changes through Time
14.2 Personalization Process

15. Segmentation
15.1 Geographical Segmentation
15.2 Demographical Segmentation
15.3 Psycho Graphical Segmentation
15.4 Behavior Oriented Segmentation
15.5 Techno graphical Segmentation
15.6 Appraisal of the Segmentation

16. Predictive Behavioral Targeting Definition
16.1 Historical Background
16.2 Target Goals
16.3 Different Versions of Targeting
16.4 Keyword Targeting
16.5 Time Based Targeting
16.6 Context Based Targeting
16.7 Psycho Graphical Targeting
16.8 Behavioral Targeting

17. Evolution of Contacting a Target Group
17.1 Technique
17.2 Advantages
17.3 Problems
17.4 Specific Targeting Techniques

18 The Predictive Behavioral Targeting System

19. Nugg. Prove

20. Conclusion

21. Bibliography

List of Tables

Figure I: First Web-Banner

Figure II: Internet Advertising:1996-2006

Figure III: Banner Difficult to find the close Button

Figure IV: Organic & Paid results

Figure V: OVK Statistik 2007-2009

Figure VI: Analyzed Data/Profiles http://www1.target-group-planning.de/

Figure VII: Bad Homburg www.badhomburg.de

Figure VIII: TGP, TGP_Broschre_090224_final.pdf

Figure IX: Campaign Comparission

Figure X: Goggle Sponsored Link

Figure XI: Content Ads

Figure XII: Web. Millieu Classics, TGP_Broschre_090224_final.pdf

Figure XIII: Evolution of Contacting a Target Group

Figure XIV: Profile Association

Figure XV: Life System, http://www.nugg.ad/en/products/technology.html

Figure XVI: Nugg.ad Results

http://www.nugg.ad/fileadmin/redakteure/downloads/Case_Studies/Case_Studys_Clean/Casestudy_Tripple_nugg.ad__EN_.pdf

1. Introduction

Over the time, many Internet users have rejected online advertisement. The reason is that users do not associate with the ordinary advertisement and therefore can not find a connection to it. The products and services shown on websites are not what a particular user wants to have, wishes or needs.

This capstone should emphasize that through “Predictive Behavioral Targeted” advertisement the insensitivity will be increased significantly in comparison to ordinary online advertisement while talking about WEB 2.0. Advertisement for specific products will be created and developed just for exact kinds of people and not for the mass. That will sell products much faster and companies or advertisement agencies do not have to place unnecessary spots, banners, etc. on websites anymore.

This document will give precise analyzed information and answers to the question if “Predictive Behavioral Targeting will change Online and Direct Marketing ways in near future”. To understand the principles of online marketing I will explain how traditional online marketing has been established, what kinds of marketing have been used the most, which ones have been most effective, which ones will continue to grow and have a huge impact on our society and its buying patterns.

1.1 Problem Statement

According to a report done by Bitkom^[1] more than 1,3 billion people are online. That means that each fifth is using the Internet. In North America more than 246,000,000 users were online in 2008. North America has an Internet penetration rate of 73.1% in regard to the Internet World Statistics. This number has a high potential but as mentioned earlier users are not so fascinated about blinking banners anymore and different banner games. That time is over. The user is obtaining advertisement that is not of interest for him/her at all. In the OVK Report 2008^[2] it is written that the German advertisement industry spend 2,9 billion Euro in online advertisement in 2007. From that amount approximately 1,5 billion have been spend on ordinary / classic online advertisement which are banners, wallpapers, pop-ups. 1,19 billion were spent on keyword advertisement and 0,215 billion on affiliate networks. It is for sure that half of the money is wasted while doing online advertisement but it is difficult to find out which half that is. Its time to use improved technology and adjust customer advertisement. One has to acknowledge too that 81% of all Internet users are using the Internet to do research and 78% are using it to do purchases online.^[3]

1.2 The Establishment of Online Advertisement

The first online advertisement that appeared was in 1993 which was created by Tim O’ Reilly who worked together with the National Science Foundation. They have been working on a project called Global Network Navigator (GNN) which has been seen as a new web portal. Later on, it was bought by AOL because of its significant success.

Another online advertisement brick stone which is seen as the actual beginning of the online advertisement era has been done on the www.hotwired.com website. A web banner of the size 468 x 60 Pixel has been implemented. Still today that is a standard banner. The telecommunication company AT&T has been the one that actually established online advertisement.

First Banner looked like this:^[4]

illustration not visible in this excerpt

Figure I: First Web-Banner

The cost of this banner was $30.000 per month and it had CTR of 40%; therefore, the money was worth it. That success was imitated pretty fast and a new online medium was established. The following years online advancement has made changes to banner sizes up to the establishment of multimedia advertisement.

According to techcrunchies.com the click through rate (CTR) for banners is decreasing steadily in 2004 it had a percentage of 0.33%, 2005 a 0.23%, 2006 a 0.22%, 2007 a 0.17%, and in 2008 a 0.19%. However, video ads are much more interesting and brought in combination with real self made videos. If YouTube would implement video ads it could have two results. One is that Google would earn much more money by placing short ads and another one would be that YouTube would maybe loose a percentage of its customers.

illustration not visible in this excerpt

Figure II: Internet Advertising: 1996-2006

As we can see on the chart which is showing data from 1996 to 2006^[5] the Internet advertising continuously increased until 2001 where the Internet bubble exploded and

people stopped believing that Internet and its features will change ones whole perception and life attitudes. However, in 2003 it started to increase again and this time more than ever before. This radical increase has to do with all the new features, tools, possibilities the Internet and different platform are providing to companies and ordinary business people. Day by day more people consider online advertisement being more effective than traditional advertisement.

2. Standard Banner Sizes

There are many different kinds of banners. Some sizes are 468 x 60, 392 x 72, 234 x 60, actually each imaginable form can be created as long as it fits into the web-advertisement space. Banners can be created in JPEG, PNG or even in Flash. They can be seen as a button, horizontal or vertical skyscraper, or as an usual banner. The price to insert a banner advertisement on a website has to do with its size, the period of time it will stay on the website, the business category, and of course with the owner of the website. The more traffic a website has, the more it can charge from advertisers. That’s one way how banner advertisement can be charged on a website, but there is another way as well which is much more common nowadays. A prime example of the new payment method is Adwords from Google. Here one can set a budget which will be discounted due to its banners Impressions, Click through rate (CTR), Cost per million (CPM), Run On Site (ROS), Cost per sale (CPS).^[6]

New recent created functions of banners are that while a user has an impression and the banner is animated it will maybe be posted horizontal or vertical. In addition, as soon as a user rolls over the animated banner with the mouse cursor, the banner starts to give sounds or plays a music song. That’s quite interesting because people can choose when they want to hear music and when not. It makes a banner less annoying and less unattractive. Other luring banners are banner games where users can target an objective with their mouse and fire by pressing the right mouse button. Games are always very attractive and increasing attention.

A huge advantage between traditional or lets call it offline advertisement and online advertisement is that it is finally possible to track how many users actually clicked on a banner and even went further to obtain information. Everything is measureable. This measurable tool is very beneficial and differentiating itself from traditional advertisement. That is another main reason why companies and business people as well as ordinary people like to use online marketing instead of offline marketing. For example, in Adwords if a campaign is not working well, it is easy to change it and create other ones. Modification and flexibility in regard to online marketing is playing a huge role and a necessity.

Additional banner size information:^[7]

- Superbanner has a size of 728 x 90 Pixel
- Centre Banner has a size of 478 x 90 Pixel
- Wide Skyscraper has size of 160 x 600 Pixel
- Rectangle has a size of 180 x 150 Pixel
- Button Ad has a size of 120 x 120 Pixel

It is said that because of the overdue and massive banner online advertisement users decrease their awareness of online advertisement and a new form of online advertisement is attracting more users. Companies are attracting and promoting their brand to more users through entertainment video and blogs.^[8] YouTube.com is the one entertainment video site that has more than thousands users a day. The website is ranked 3rd where 1st is the best in regard to alexa.com. The page with the highest combination of visitors and page views is ranked 1 which is for example Google.com.

Users are not so fascinated about ordinary advertisement they are much more excited about seeing a special created video that should attract their attention.

2.1 Effectiveness of Special Banner Implementation

After such a long time being on the Internet users get used to the many different banners and do not care anymore what a banner is saying or displaying. Not even mentioning Pop-ups which are already doomed of their existence. Each browser has pop-up blocker functions which millions of users do not even know how to disable. Spending money on pop-ups is the same as throwing money out of the window. These measurements are the improvement of banner advertisement. For example, synchronal build banners which means that two banners on a site belong together and where one banner starts with an action and the other one stops the action. This banner actually moves its audience’s eyes and attraction from one side to another. That adjustment makes the advertisement more interactive and interesting.

2.2 Development of Banner & Co

It is really amazing to see how online advertisement changed for example from posting ads on the side of websites to doing penetration. Through the penetration method users are not able anymore to choose reading the ad or not; users have to read it. That is changing the consumer’s perspective of online advertisement a lot. Users are becoming mad about these kinds of penetration and due to that the interest in clicking on ads is decreasing enormously. The study of the Tomorrow Focus AG “AdEffects 2006” one can realize how online advertisement is received by the user.

An insight has been given to these advertisement formats:

- Expandable Rectangle
- Flash Layer
- Medium Rectangle
- Skyscraper
- Splitscreen Ad
- Super Banner
- Tandem Ad

The product recognition rate for the Flash Layer is at 83%, which is followed by the Medium Rectangle with a percentage of 37%. The Splitscreen Ad which comes at the end has a percentage of 26,2 %. The Tandem Ad has just 0,9 % more and is therefore on the penultimate place. Another highlight of this study shows that even though some have a high recognition rate they produce a really negative feedback.

Surprising is that negative perceived advertisement have been looked at much longer than positive perceived ads. That has to do with the difficulty finding the close button. Users just cannot find the close button immediately and that is why the window stays open much longer. These ads are very tricky because some of them have invisible close button or the close button is placed way too high or too low where nobody would expect it.

illustration not visible in this excerpt

Figure III: Banner Difficult to find the close Button

3. Behavior and reasons of Internet users

How do Internet users behave while using the Net? What are the reasons they behave like that. These days, people can find everything on the Internet, be it online banking, buying books, electronics, music, medicals, services, businesses and so on. A user has everything given to work from home without even seeing once the sunlight. Using the Internet is becoming very comfortable. That has to do with the increased Internet speed, easiness, addictiveness, user friendliness, peer pressure, communication, and other important facts that are seen as live changes and benefits to a life standard.^[9] Usually, Internet users have a few favorite websites which they access everyday. To increase one’s company’s reputation and brand awareness they should target exactly these sites drastically without exception.

Following the studies of OVK and Bitkom we already know that for example in Germany more than 52 million people are using the Internet and Germany has a population of 88 million. The OVK study is analyzing people who are over 14 years old and have been on the net at least once in the last three months. People with age ranging from 14-49 are covering more than 84% of the relevant advertising market. More than 59% of elderly people with age 50-59 years are already using the Internet. Two years ago it just has been 52 %, one can see that this percentage is steadily increasing.

3.1 Behavior Profile

To distinguish between behaviors and preferences of Internet users I will use Dr. Thorsten Schwarz theories and three profile breakdowns.^[10]

- The entertainment oriented
- The communication oriented
- The shopping oriented

At the same time these three profiles will be categorized into five age groups:

- until 19 years
- 20 to 29 years
- 30 to 30 years
- 40 to 49 years
- From 50 years

The younger generation from 40 years down is interested in entertainment and communication. Especially wide spread are the interests for new music downloads, meet with friends on social networks (studivz, facebook) or to play online games.

The Internet user in the mid ranged age likes to spend time on online shopping rather than on communication or games. 75% of the shopping oriented are older than 30 years. That is because they have the money to buy and are working as well.

The Internet in Germany reaches 95.7% of the people with age 14 to 19, 91.2% with age 20-29, 84% with age 30 -39, 75.3 % with age 40 -49, 60% with age 50-59 and 24,6 % with age 60 and more.

3.2 Internet Usage

For more than 90% of the Internet users the Internet is a necessity and impossible to live without it. On first place stands the online communication, second are researches made through search engines and news media. Even more than 50% are using online banking and doing online shopping. It is obvious that the Internet is responsible for a wide range of consumer purchases. The Internet became a tool to make easier purchase decisions.

The time where users used the Internet to obtain information about a product and then buy it offline is disappearing slowly but surely, instead product search and product purchase are all done at once on the Net and at home. To analyze how many product viewers have become to a buyer a conversion rate is used. The formula is (buyer / visitor)*100

3.3 Study of User Behavior in Social Networks

A social network^[11] is seen as a platform where users can add another user, write comments, reviews, give feedback, ratings and add their own link. Here users can upload pictures, music, text, link with websites, send and obtain internal emails, block and invite users. Furthermore, it is also seen as a social search engine. Users have the ability to search for other users, products, information and their data is available to be seen on general search engines as well. Search engine spiders make it possible to let users profile be found easily.

The three biggest search engines (Google, Yahoo, MSN) have more online visitors than any social network. According to IReport.com one out of every four Internet users accesses a social network at least once a month. Even though there are websites which are not so frequently visited one can do extreme targeted advertisement and analyze users visiting the specific site. Doing advertisement on social networks is profitable because social network users have a couple of reasons why to use a social network and why to return to it. Some reasons include entertainment, contacts, research products and services, or even purchase a product or service. A deficit is that these networks are more affective for already established brands and therefore increase ones brand awareness. Studies and even own experience show that many social network users do not react very positively on new introduced brands and products. One has to keep in mind that users have trust in other users. As soon as a user obtains a recommendation about a product, service or website from a trusted social friend it is highly possible that he or she will have another view on the suggested object than before. That is exactly the way companies are using social networks to be productive and gain competitors advantage. The procedure that has to be taken to be successful with such a strategy is first to create an ordinary profile, become friends with as many people as possible, stay under radar of the social network anti-advertisement guards and then slowly but surely advertise or recommend products to long made friends. Analyzing and creating statistics of potential consumers is the most effective tool and strategy that exist these days in regard to the Internet.

PriceWaterhouseCoopers has made a study of the potential online consumer being in social networks. In regard to online advertisement I will emphasize on the registration behavior, activity level, change of networks, and acceptability of advertisement.

3.4 Registration Behavior

To make a social network successful and gain the opportunity to integrate advertisement on the platform it is a good idea and actually necessary to have users register themselves while becoming a member of the network. Through this registration many important data and valuable information can be won. Statistics of demographics, age, gender, interests, etc. can be established that create a better picture of the users profile. Furthermore, activity, usage, relationships, improvements of the networker can be followed exactly and assigned correctly. According to studies and a Nielsen online report it is known that the top three social networks are Facebook, Youtube, and MySpace. There are many more social networks but differences in features and targeted groups make up the number of registered people. The reason why people register in these networks is that they want to enjoy the full benefits and possibilities the network has to offer to them. Not being registered means not being able to upload a video or picture for example. A prime example is YouTube where non-registered can watch videos but are unable to upload their own. Another reason why YouTube has so many members is that it belongs to the Google Empire since 2006. Furthermore, Nielsen reports that Social Networks and Blogs are on 4th place in regard to online activities. It is even ahead of personal email. The time spend on Networks is almost ten percent of all Internet time. More than 67 percent of the global online population visit a blog or a social network.

3. 5 Activity Level

The main reason why users are always coming back to their social network has to do with the information received, strong relationship to other users, and given benefits and features. It is even interesting to know that members of platforms are contributing in improving their network with their own knowledge. Members are actively working on the platform. By and large, these platforms are surviving and improving day by day just because of the members input. Testing, opinions, ideas, suggestions, desires and changes from members are very vital to a social network progress. The more freedom, power, and influence a member has the more trust s/he will create.

3.6 Behavior in Changes of Social Networks

According to the studies it says that people who are already more than six months a member of a network do not want to change their network anymore. Being part of their network is necessary to stay on top and be productive. Therefore, as soon as a person created a profile it’s a great opportunity for the platform owner to advertise with the number of memberships, its duration and activity level.

3.7 Acceptance of Online Advertisement on Social Networks

To the question if advertisement would be a reason to leave a social network, a high percentage of members say that they would arrange themselves and it would not bother too much. Of course, there are always some that can not stand advertisement and leave their build networks for a better good. Nevertheless, it is difficult to leave a network just from one day to another. By leaving the social network a huge part of the connections and contacts will get lost. All the time spend on that particular platform will be wasted just because of the implementation of advertisement. Just people with a lower activity are able to do that without hesitations but for people with high activity level that could become really difficult.

With “Predictive Behavioral Targeting” advertisement will be personalized and spread out. Many people are in favor to that kind of advertisement instead of the not personalized advertisement. Personal advertisement is based on the given profile data received by the registration and during the usage activity. According to that data special profile advertisement will be created that will just reach chosen users.

4. Market Share of Online Advertisement

The development of online marketing just has one direction and that is upwards. According to Zenith Optimedia International Group^[12] which analysis on regular basis the development of advertisement and marketing is always correcting its forecast numbers that steadily increase. The company is guessing that 9.4 percent of total advertisement spending of the world will be spent online in 2009. Online advertisement will be on place three behind print advertisement and still behind TV-Commercial advertisement. TV-Commercials should have a market share of 37.5 percent in 2009. It has been predicted that online advertisement would increase by 83 percent from 2006 to 2009 but recent analysis show that it actually grew by more than 95 percent. In contrast, TV and Radio advertisement just grew by 13 percent.

Actually, some target groups are just reachable online; therefore, companies should not miss to offer their products online.

5. Development through Time

The first online advertisement message has been received through a static banner, step by step new development and advertisement formats have been created and searched for. The first improvement came through the interactivity of search engines. For example Google is showing organic and paid results. The searcher who is typing for example table into the search engine receives next to the organic results a list of paid advertisers. This advertisement is based on keyword generation.

Pleases have a look at the above image that demonstrates it correctly.

illustration not visible in this excerpt

Figure IV: Organic & Paid results

Through this new search process and results containing direct marketing for search engines has been established. The goal was it and still is to minimize work and effort for the user who is searching for a particular product. The consumer should receive product offers before s/he is even searching for them.

[...]

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^[4] “Banner ads tenth birthday!,” http://commercial-archive.com/content/banner-ads-tenth-birthday 27 Oct 2004

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“Usage and population Stats.”http://www.internetworldstats.com/stats2.htm

http://www.internetworldstats.com/usage/use012.htm

^[10] “Thema: Strategien & Konzepte ,”http://www.online-marketing-experts.de/index.cfm/Neuanmeldung/:var:site:probeabo, 2009

^[11] “iProspect Social Networking User Behavior Study,” http://www.iprospect.com/about/researchstudy_2007_socialnetworkingbehavior.htm, April 2007.

^[12] Advertisement - Internet Trends, http://www.ipa.co.uk/SearchResults.aspx, http://www.ipa.co.uk/SearchResults.aspx, 2006-08.