AdTech Processes

What is Ad Retargeting and How Does It Work?

In an ideal world, every client entering your website buys a product, signs up for your newsletter, downloads your ebook, or does whatever else you consider a goal, but the reality is hardly ever like that. Converting leads into satisfied customers is a long and winding path. Retargeting makes it a little easier.

Limited attention spans, banner blindness, ad overload — all these problems pervade the modern e-commerce landscape and make effective ad targeting and selling of services or products increasingly difficult.

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Getting an Internet user to enter your website is only half the battle. Until a sale is made, your most elaborate ploy to profit may still be thwarted. Modern online shoppers are rather whimsical and timid creatures. They can slip away for various reasons, whether it is an occasional distraction, second thoughts, a website crash, temporary lack of money, or otherwise. Whatever the reason, there is no way to effectively prevent the user from leaving your website by closing the browser or tab. However, there are ways to remedy the problem. Enter ad retargeting.

What is Retargeting?

Retargeting (or, using Google’s nomenclature, remarketing) is a way to make the ads “follow” those customers who, for some reason, have left your store without making a purchase.

People don’t necessarily visit stores to make the purchase immediately. More often than not, a visitor to an online store would pop in to simply research whatever they want to buy, or compare the features and price of an item with other products. While the idea to make the purchase is slowly budding in their heads, the ultimate decision may not necessarily be made on the site. This is why it is so important for a retailer to be present when the client has finally made up their mind.

How Does Retargeting Work?

Technically, retargeting boils down to following anonymous visitors who have previously visited your website, and showing them ads for the products or services viewed. This works across different channels, including social media, display, and email. Such advertising serves as a kind reminder to finalize the purchase. In order to identify users across the web and show retargeted ads to them, a third-party cookie from a retargeting ad service must be saved to their browser. It’s commonly referred to as third-party because it’s stored in a retargeting service’s domain.

Here’s a nice video by Isaac Rudansky explaining the basics of ad retargeting:

Retargeting is implemented by adding a piece of JavaScript code or a pixel (literally a 1×1 image) to your website’s pages, typically in the footer. This pixel is small enough so it’s not seen or noticed by the user. It allows the retargeting ad service to send a request and drop a cookie. Since every pixel contains a unique code, the cookie helps recognize you in the retargeting process (although you don’t see it on the site).

The easiest way to do this is by sending a request to retrieve a file — an image, for example — from that retargeting service’s domain when the page loads, but the retargeting ad service wouldn’t necessarily want to show some random image to the user, so instead they show the smallest image they possibly can — a 1×1, transparent pixel that is actually never seen by the visitor. For this reason, a retargeting tag (i.e. JavaScript code) is often referred to as a retargeting pixel.

Here is a visual representation of how the retargeting process works:

Here is a step-by-step explanation of what’s happening in the image above:

  1. The online visitor visits shoeholics.com and looks at a pair of shoes.
  2. The retargeting service’s code located in between the <footer> </footer> tags sends a request for a 1×1 pixel.
  3. The retargeting service sends back the 1×1 pixel and assigns a cookie to the user (under their domain, ads.retargetser.com), storing information about the visitor and their behavior, such as the product they viewed.
  4. The visitor leaves shoeholics.com and accesses a different website — news.com — and sees an ad for the exact same pair of shoes that they were looking at previously.

To wrap your head around cookie tracking, read more about it in our earlier blog post.

How did the retargeting service know that the visitor on news.com was the same one from shoeholics.com?

It all has to do with the third-party cookie the retargeting service assigned to the visitor on shoeholics.com. The ad displayed on news.com is loaded from the retargeting service’s domain, and the cookie is included in the ad request. This way, the retargeting service recognizes that this is the same visitor who has visited shoeholics.com before.

The retargeting service in the example above would be an Ad Tech platform of some sort, for example, a demand-side platform (DSP).

Once the DSP has assigned a cookie to that online visitor, it can bid on impressions in an ad exchange that would be seen by that visitor on other websites.

However, in order for the DSP to identify that visitor on the ad exchange (remember the ad exchange can only read cookies it created) it would need to swap cookies with the ad exchange via a process known as cookie syncing.

Cookie syncing allows the DSP and ad exchange to exchange and match their cookies together, allowing them to identify online visitors (via their cookies) as they move from website to website. In other words, it lets the platforms exchange data about the online behavior of visitors.

Benefits of Retargeting

Immediate effect. Retargeting is fast. Once set up, it’s automated and needs no human interaction to work properly. Your website’s visitors can start seeing displayed ads as soon as they’ve left your site, but you can configure the settings to change this.

Efficiency. Retargeting helps to streamline the cost of your campaigns. It allows you to target just those users who have, implicitly or directly, expressed interest in your product or service. Simply put, targeted advertisements offer a better bang for your marketing buck.

The numbers speak for themselves. There is evidence that retargeted ads are not only more visible to internet users, but also more effective than regular ads.

  • An impressive two-thirds of those surveyed said they noticed the ad just because they had researched the product before (conversely, non-remarketed ads would commonly go unnoticed due to the so-called banner-blindness). While this may not necessarily read as a purchase intent, the brand still gets the valuable mindshare.
  • Also, around 90 percent of surveyed users have either a positive or neutral reaction to retargeted ads. This is partly due to their higher relevance compared to the traditional spray-and-pray ads — i.e. ads with little or no targeting parameters.
  • The average click-through rate for retargeted ads is about 0.7 percent, while display ads rate 10 times lower at only 0.07 percent.
  • Retargeting yields an eye-watering lift in in search behavior at 1,046 percent.

Challenges of Retargeting

  • Don’t overdo it. Retargeting is as powerful as it is pernicious, so use it wisely. While it might be tempting to go full guns-blazing and pummel users with all the ads in your inventory just because they have visited your website once, the result may be detrimental. Too many of the same ad following a user for weeks on end may feel to them like stalking, and you certainly don’t want to come across as intrusive.
  • Cookie trouble. Retargeting doesn’t work without cookies. If a user browses the net in incognito mode, for example, their cookies are deleted the moment they close their browser, making it impossible to display retargeted ads. On top of that, users can also choose to block third-party cookies via their browser’s settings.

    It’s hard to retarget ads to users across different devices, partly because desktop and mobile devices are based on different technologies to store and read cookies. This calls for other, more elaborate methods to identify devices on the web and pin them to individual users, like deterministic and probabilistic matching.

    Internet browsers are not making the cookie puzzle easier. Safari on iOS, for example, has a reputation for being hard on third-party cookies, which it blocks by default. Additionally, this year, in line with the new system-wide cookie policy implemented with iOS11, first-party cookies in Apple devices will be considered much like fast-moving consumer goods. As a result, they will expire within 24 hours of being stored in your device’s hard drive. The change will redefine the idea of the first-party cookie as we know it today. Networks will be given a limited amount of cookies readily available to use, and an incredibly narrow timeframe for retargeting campaigns.

    For advertisers, the lack of third-party cookie-tracking options means impossibility to collect and store personalized information about users. Of course, this won’t stop ads and retargeting completely, but will make the process a little more difficult.

  • Retarget to people, not devices. Since retargeting is based on cookies, the service is able to track devices, not people. Technically, this means that there is no way to tell whether the PC is being used by you, your mother, or your daughter. This usually leads to irrelevant ads being displayed to each user and, as a result, wasted remarketing budget on the advertiser’s side.

    On top of the above, it is not uncommon for users to have several mobile devices and/or laptops they use on a daily basis. This poses a challenge for the advertisers to connect the dots and find the effective attribution path in the ever-expanding user-device ecosphere. Consistent and relevant ad retargeting is more likely to yield better conversion.

    Social media and all the sites that require users to log in across devices (like Google, Amazon, Apple, eBay, and Yahoo) can target ads more effectively as they take advantage of personally identifiable information. This is where deterministic and probabilistic matching come in handy.

    Probabilistic matching, although not as accurate as deterministic ID matching, pins the devices to individual users based on various pieces of information about them, such as IP address, location, age, gender, and interests that are consistent across all their devices. Such methods may soon become the main driver of effective retargeting, allowing to track user IDs rather than just devices.

  • Retargeting is a nuanced process. It requires a proper strategy and segmentation of users. Retargeting yields best results when visitors to your website are carefully divided into segments that are targeted individually, e.g. by using different custom parameters in retargeting tags on each product page or product category. This helps to display only the ads your users are genuinely interested in and saves you a lot of money in the process.
  • Privacy concerns. On the face of it, retargeting is a good thing, intended to increase the relevance of ads displayed to potential buyers. On the flip side, since it taps into internet users’ online activities and collects information about their web-browsing habits, it raises unfounded concerns about privacy. This, in turn, contributes to the general distrust of internet users.
  • Relevance. Make sure the ad displayed as part of your retargeting campaign will lead the user to the product or landing page that he or she is really interested in. Linking to the home page is considered bad practice.

Conclusion

There are a couple of good reasons to use a retargeting campaign, but the most obvious goal is better conversion, i.e. making people take a particular action on your website, whether it is finalizing their purchase or signing up for a trial version of your product.

The efficiency of your retargeting campaign can be easily measured with metrics like website clicks, the number of forms submitted, and cost per lead (CPL), giving you plenty of possibilities to further tweak the campaign or adjust the creative. While retargeting may not necessarily lead to a conversion, it can be used to increase brand awareness by the ever-important extended exposure.

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