When Untargeted Advertising Is Better Than Highly Targeted

Compare costs over results when looking at targeted versus general ad buys; you may be surprised.

How on earth can untargeted ads be better than targeted ads? It’s really quite simple. Targeted advertising is going to cost you more, perhaps much more. For instance, the cheapest advertising I’ve bought so far had a cpm [cost per thousand] of 42 cents. Now, I’ll admit that such deals are not easy to find, but they are out there if you look hard. Targeted ads can often cost $20, $50, or much more. I’ve actually paid the ridiculous sum of $150 for 1,000 contacts. I’m almost embarrassed to admit that, except that I know I’m by no means alone, and many large and important companies have bought from this same source. Of course the cpm of $150 was justified because this ad was so tightly targeted.

Now, look at these numbers. $150 is more than 357 times 42 cents. That means the expensive ad has to be more than 357 times as effective as the cheap ad just to balance out. In fact, the ad campaigns were about equally effective at bringing people to my site–but the expensive ad was about half as effective at bringing in sales. So the sales I got from the highly targeted ad–sorry, the sale I got from the highly targeted ad–cost 714 times as much as each sale brought in by the cheapo ad.

This, to an advertising salesperson, makes no sense. Of course a highly targeted ad will do better for you! And in most cases, it may do so. A highly targeted ad should bring you more sales than an untargeted ad. But simply bringing in more sales than the untargeted ad is not good enough. It has to bring in proportionally more sales to balance out the higher cost.

There’s another problem. You may think you’re targeting carefully when you’re not. For instance, let’s say you’re selling a product to a business audience. Compare a general-interest email newsletter or bulletin–such as a daily joke mailing going to 100,000 people–with an email message, containing nothing but your ad, going to an opt-in list of 100,000 business people. The second is more targeted, isn’t it? But as these are different media; you can’t be sure that the people receiving your ad–and nothing but your ad–are actually reading the message. You can be fairly sure, though, that most people are opening and reading the joke message.

Don’t let advertising sales people confuse you. Targeted ads may–but may not–bring in a higher response than untargeted ads. But that doesn’t mean they’re worthwhile. You still have to factor in the difference in cost, and the fact that it’s difficult to compare an untargeted ad in one medium with a targeted ad in another.

Here’s another example. I’m currently advertising with a banner ad at a business Web site. I’m paying a cpm of $20, which is good, considering that the ad is pretty well targeted; I could be paying two or three times that rate. I seem to be getting a click-through [percentage of viewers who click on the banner] of 9%, which is very, very good. (So far I haven’t had many impressions [views], and I suspect this number may drop as the campaign continues.) So each click-through has cost me 22 cents. On the other hand, I’ve paid a cpm of 42 cents, with a 1% click through; each click through cost me 4.2 cents. Which was better?

Peter Kent is author of the acclaimed book, Poor Richard’s Web Site. This article is taken with permission from his excellent newsletter, back issues of which are available at http://www.PoorRichard.com/