Putting goods on display

Many last-minute online holiday shoppers don't know what to get and have only days to get it. These shoppers are open to gift suggestions, especially when offers include guaranteed delivery by Christmas.

Watch and jewelry retailer Ashford.com decided to target these shoppers in the days leading up to Christmas 2009. And it chose online display ads to get the job done.

But it didn't just put banner ads on web sites at random. It was able to present the ads to consumers whose online behavior has marked them as watch and jewelry shoppers, and it could choose the consumers it wanted to reach by age, gender and household income. The e-retailer also was able to target consumers who had visited Ashford.com but left without making a purchase.

Ashford was able to pinpoint the consumers who would see its ads by using behavioral and demographic ad targeting and retargeting technology and services from The Nielsen Co.'s Claritas and the ad networks from Yahoo Inc., Microsoft Corp., Permuto Inc. and FetchBack.

The ads Ashford presented assured last-minute shoppers that if they placed an order by the afternoon of Dec. 23 the orders would be delivered the next day. Traffic to the site surged: On Dec. 1 it was 50,000 visitors; on Dec. 23, after the ads had been running a few days, it was 100,000.

Sales on Dec. 23 were up 300% over Dec. 1. At $500, the average order value was significantly higher than the norm. And, the retailer says, it was the online display ad campaign, as shown by tracking codes and web analytics, that was responsible for generating approximately one-third of the increased sales.

"Display gives us the opportunity to be more visual and reach a broader audience than search or e-mail," says Eli Katz, president of Ashford.com. "Around the holidays it's not just watch aficionados looking for watches but people looking for a great holiday gift. They suddenly see our ad and we visually communicate guaranteed holiday delivery and brand-name watches. We've now catered to a whole different customer who wasn't really looking for us before."

Hitting the target

Ashford was successful, Katz says, because it was able to show its display ads specifically to consumers who fit into the ad network's category of likely watch and jewelry buyers and who were of a certain age, gender and income. It's this kind of demographic and behavioral targeting that is causing retailers to take a new look at online display advertising, a marketing vehicle largely dormant in e-retailing.

Ad targeting works, retailers who've used the techniques and experts say, and the techniques likely will lead to more retailers adding online display to their marketing efforts.

Behavioral targeting and retargeting are catalysts behind retailers beginning to spend more on online display advertising, says Cheryl Kellond, vice president of advertising business at ChoiceStream Inc., a vendor that specializes in product recommendations and personalized online display ads. Kellond formerly was vice president of product marketing for advertising at Yahoo Inc.

"Experimentation is back," she says, "and retailers are really committed to finding out what works. This is the year the shift in spending in retail will move from newspapers to online display."

However, privacy advocates have complained about web ads that are directed at consumers based on their behavior, and government officials have threatened action if the advertising industry doesn't police itself. That has moved marketing trade associations into action, so far forestalling new regulation of behavioral targeting.

The behavioral targeting possible today enhances other advantages display ads have over other forms of interactive marketing. Display ads reach millions of consumers, many of whom may never have heard of a particular retailer, while e-mail marketing only reaches a merchant's existing customers. And display ads can be more compelling than paid search ads that are limited to a few lines of text.

Advertisers of all kinds are showing confidence in the marketing tactic through their ad spends. In 2009, advertisers spent $7.8 billion on online display, according to Forrester Research Inc. The firm predicts $8.4 billion this year and $16.9 billion by 2014.

One retailer investing more heavily in online display advertising because of its targeting capabilities is apparel and accessories retailer New York & Company.

The retailer last year undertook a display campaign aimed at shoppers who came to the e-commerce site via paid search but did not buy. It bought space on the thousands of sites in the Right Media ad network at $2.22 eCPM, or effective cost per thousand ad impressions, the average price. That means the retailer pays whether or not consumers click on an ad, unlike paid search ads that only charge for clicks.

Here's how retargeting works: When a consumer comes to the e-commerce site, New York & Company assigns her a cookie; the cookie contains no personally identifiable information, only her browser's identification number. The cookie records where the consumer came from and what she does on the site. Right Media receives a copy of the browser identification number and whenever that number pops up on one of the sites in its ad network it shows a display ad for the retailer.

In the campaign that New York & Company ran last year, the ads touted free shipping on orders that met price thresholds.

"There were more sales and more new customers. The click-through to conversion rate was high, the cost per order was low and the average order value was high," says Amy Wong, marketing manager for e-commerce at New York & Company. "We were thoroughly happy with the results and shifted more funds to display."

New York & Company works with search engine marketing and online display ads firm Didit.com LLC. In-house, a creative designer puts ads together based on input from the marketing team. The marketing team and Didit analyze the campaigns. "In a given week no more than five hours is spent in-house on analysis and tweaking campaigns and some more hours on design," Wong says, for a total in-house weekly cost of $3,000 to $5,000 when a campaign is running.

At Ashford.com, when it comes to creating and monitoring online display ad campaigns, Katz says it's difficult to break out a cost.

"Marketing, customer service, warehouse, fraud check all had to be in the process to ensure we could handle extra orders during the holidays created by the campaign," he explains. "It's all in a day's work."

Working with paid search

And it's all in a day's work for display to complement paid search efforts, Katz and Wong say.

"When shoppers come to our site from paid search and educate themselves on products, we cookie them; then they go back out to the Internet where we serve them an impression of a display ad. In that way you're reinforcing the paid click," Wong says. "When you start coupling strategies, online display becomes much more powerful."

One of the fundamentals of advertising is frequency, Katz adds. "The searcher who has seen our display ad is more likely to click on our search result," he says. "The customer needs multiple touch-points, reinforcement to convert into a sale."

Paid search is a tried and true marketing vehicle. But some merchants are trying new methods of online display to reach an even broader audience, or pinpoint a specific demographic.

Universal Studios Home Entertainment decided to be the first to try a new type of mobile ad from technology vendor Adgregate Markets. The mobile ads, dubbed ShopAds, enable consumers to purchase the advertised product right then and there, within the ad.

Young, mobile users

In December, Universal was promoting the DVD release of the film Inglourious Basterds. As part of its marketing efforts, it ran an ad campaign targeting 18- to 24-year-olds using several mobile apps that are part of the Greystripe Inc. mobile ad network, which compiles the demographic data. Greystripe signs agreements with mobile app owners to join its ad network in the same way a conventional ad network signs up web sites.

At certain points within the apps, the ad popped up as an overlay on the screen with an image and text promoting the film, and a Buy button. Clicking on the Buy button began a checkout process to buy the DVD that could be completed without leaving the overlay.

This is the first ad of its kind for both parties and they decline to reveal financial results. However, a spokesman for Adgregate says the program exceeded expectations.

Another new online display ad approach is using social media connections between consumers to target ads.

Ad technology firm Media6Degrees cookies a client's consumers—only web browser IDs are collected, not personally identifiable information—and, through data deals with social network and blogging provider companies, follows them through the social web. After identifying through web analytics on the client's site what it calls brand loyalists, it matches their visits to social sites with those of other consumers. What it's looking for are niche sites that both loyalists and others visit.

"If you and I are connected via the New York Times, that gets a low rating. But if you and I both went to the same page of a food blog, we consider that a very strong connection," explains Tom Phillips, president and CEO of Media6Degrees. "So we map those connections and show both consumers the ads."

Consumers who share very similar interests are likely to be attracted to the same display ads, Phillips says. And a brand loyalist can lead a retailer to many other consumers who share similar interests.

It's this kind of tracking and other forms of behavioral ad targeting that's led to complaints from privacy advocates and threats of legislation from congressional critics, notably Rep. Rick Boucher, a Virginia Democrat who argues for what he calls a baseline protection in the online space.

"If someone does not want a web site he visits to use information it collects to deliver ads to him," Boucher has said, "he should be able to opt out of that use. And if a web site wants to provide information to an unrelated third party, it should procure that Internet user's affirmative opt-in consent."

Those privacy concerns also prompted Federal Trade Commission chairman Jonathan Leibowitz to warn of new regulation of online behavioral targeting if the advertising industry did not regulate itself.

Those threats have led to industry action.

In July 2009, the Interactive Advertising Bureau, Association of National Advertisers, the Better Business Bureau and the Direct Marketing Association released self-regulatory principles for online behavioral advertising, which were met with a positive response from the Federal Trade Commission.

"We created these self-regulatory principles to comprehensively address how all online advertising should work, and they talk about transparency, consumer control, data security and consumer education, among other things," says David Doty, senior vice president, thought leadership, marketing and events, at the Interactive Advertising Bureau. "They specify what kinds of notice consumers should be provided, where it should be provided, how data should be safeguarded, and more."

The organizations also launched their own ad campaign called Privacy Matters to explain ad targeting to consumers. It has delivered 500 million ad impressions, donated by ad networks and other firms, leading consumers to IAB.net/PrivacyMatters, where the techniques of online display advertising are explained, emphasizing that advertisers do not collect personally identifiable information.

For now, ad targeting is a tool retailers can use, and are using in growing numbers. More success stories, like those of Ashford and New York & Company, likely will lead more e-retailers to add display ads to their marketing arsenal.