Database targeting has yet to prove it aids bottomline

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Database targeting, the rapidly developing technique of building powerful profiles of Web customers and prospects, has yet to prove it brings in more money than it costs.

While targeting still holds much promise, ad servers and networks are betting on technological prowess and customer service to drive their sales.

Jim Nail, senior analyst at Forrester Research, says targeting can cost more than it's worth.

TARGETING UPS CLICK-THROUGHS

So far, click-through rates have been found to be just 20% better with targeting, says Mr. Nail. Click-through rates are often less than 1%.

"That won't revolutionize your life. And if it will cost over 20% more, you don't need it," Mr. Nail says.

Certainly, making what 24/7 Media, New York, calls "database targeting" pay off will take time. Meanwhile, there's little to differentiate the major players.

"Areas of the technology are becoming commodities," says Sarah Fay, exec VP-managing director for Carat Freeman, a Boston Web ad-buying agency that counts Pfizer and The Wall Street Journal among its clients.

So for now, the industry's focus has shifted to customer service to help drive sales, offering services such as consulting and Web-hosting.

Drew Ianni, analyst at Jupiter Communications, calls this a service-oriented business model.

"Functionality is the Trojan horse" that brings servers and networks to the attention of top management, he says. "Everyone wants to move away from targeting, measuring and counting to offering strategic recommendations, changed on the fly, and real-time decisions."

So, with this new focus in mind, ad networks and serving companies are focusing on their relationships with clients and ad agencies, rather than specific technologies.

This trend pleases Peter Brine, director of online marketing for eToys, Santa Monica, Calif., which uses AdKnowledge to serve its ads. What he wants from Web advertising is simple: "Just make sure you serve the banners, and we all agree what an impression is," he says.

STANDARDS WILL TAKE TIME

Even that, however, will require industry standards and, despite all the optimism of groups like the Internet Advertising Bureau and the FAST committees, most agencies believe it will take some time to agree upon let alone implement standards.

Sharon Katz, group media director for Modem Media-Poppe Tyson, Stamford, Conn., has become a realist.

"Everyone's excited about the reporting mechanism, having a better sense of what you're doing, the immediacy of the response," she says. "But most people realize it's still in its infancy."

Copyright February 1999, Crain Communications Inc.

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