How important is protecting your privacy in the age of targeted advertising?

What is targeted advertising?

Targeted advertising is a digital marketing method that uses customer data to determine which ads they might be interested in. Marketers gather data on consumer interests, searches, and purchased products to understand their shopping behaviors and create ads based on that information.

Targeted ads, unlike traditional ones, are tailored to customer needs and desires. Generic ads, such as ones from TV and billboards, show the same content to all potential customers, hoping to attract a small percentage of them. Targeted ads are a way to increase that percentage by being personally relevant to their target audiences.

How does targeted advertising work?

Ad personalization works by collecting data on internet users and segmenting them into smaller groups based on their interests, demographics, buying and browsing history, and other characteristics.

The majority of targeted online advertising works through third-party cookies. Third-party cookies are small tracking components placed on users' devices by parties other than visited websites – most often owned ad networks.

Unlike first-party cookies, which collect data for the site owner to improve your user experience, third-party cookies collect your information for a third party. They "remember" your searches and sites visited and are used to determine your interests, wants, and needs.

Ad networks use the information collected by cookies to show you ads most likely relevant to you. For example, if you want to buy a new bicycle, you might search for bicycles online. You’ll click on some links leading to bike stores and or blogs on cycling. But after you finish your search, you might see bike-related ads on sites that have nothing to do with that. You’ll see bicycles and bicycle accessories on news sites, social media, and all kinds of other websites. This is targeted advertising in practice.

Third-party cookies are likely to be retired soon. Some browsers block them by default, and Google – one of the most important names in the world of digital advertising – plans to start phasing them out of its Chrome browser in 2024.

Marketing companies will have to adapt to the new standards. However, this doesn’t mean that the idea of targeted advertising will retire anytime soon. There are other ways to collect user data, such as browser fingerprints. Google is also developing a third-party cookie replacement called Google Topics. Targeted marketing principles will remain the same even after third-party cookies are phased out.

Targeted advertising examples

Targeted advertisements can be divided into categories, depending on their target. Some focus on your location, while others focus on your interests. Below is a list of the most popular online ad types that target specific users.

Retargeting

Retargeting focuses on customers who have shown some interest in the brand and are likely to make a purchase. As such a customer, you may have simply visited the brand’s site without buying anything or left your shopping cart full without completing the transaction. You might have even bought something – in which case the retargeting method is a way to reignite your interest in the brand and prompt you to come back for more.

Contextual targeting

Contextual targeting involves placing ads next to related content rather than on random sites and platforms. Contextual ads are designed to pique the interest of audiences already engaging with similar content.

For example, a contextual ad might display kitchen appliances such as blenders and mixers if you’re looking for dinner recipes on a cooking site.

Geotargeting

Geotargeting focuses on displaying ads based on your geographical location, which can be easily determined by looking at your IP address. Of course, your IP address can’t reveal your home address, but it can reveal your country or even city, which is good enough for digital marketers.

Companies can use geotargeting to advertise to local communities. This is especially effective for restaurants, workshops, and other local businesses that wouldn’t profit from advertising to people miles away.

Behavioral targeting

Behavioral advertising looks at how you interact with the internet and uses this information to match you with ads that are most likely relevant to your situation. Behavioral targeting considers what you search for, what sites you visit, what you watch on social media platforms, and what videos you watch.

For example, if you’re interested in working out and watching training videos, ads based on behavioral targeting can display exercise equipment even on unrelated sites.

Social media targeting

Social media targeting works by analyzing your behavior on social media platforms. It’s similar to behavioral targeting but limited to social media. This type of targeting looks at what content you engage with and displays ads based on that knowledge. It can also use your demographic information, such as age and gender, to predict your shopping interests more accurately.

An example of this type of targeting is when you like some beauty influencers’ posts on social media and then see social media ads for skin care products and accessories.

Time targeting

Time targeting is a way of determining when to display certain ads. Marketers can set up advertising campaigns to display specific ads at specific times and days. Because of this, you may see more ads for specific services and products at certain times of the day or days of the week.

Importance of targeted advertising

Targeted advertising campaigns are now one of the most widely used marketing methods, and for good reason. Unlike traditional and generic ads, targeted ads are tailored to specific audiences. This means that instead of being seen by many uninterested people, they are seen by smaller groups who are more likely to be intrigued by the advertised products and services.

Brands that use targeted advertising tend to be better recognized. They can also use personalization options that traditional marketing doesn’t allow. Brands can use user data to advertise the same products differently: for example, a private medical company might advertise differently to men, women, and seniors, appealing to them according to their needs.

The effects of targeted online advertising are measurable, allowing brands to test different campaigns to see which ones work better with specific audiences. Such information can be used in subsequent campaigns, making them even more effective.

However, companies should not forget that the effectiveness of targeted ads cannot go hand in hand with a lack of user privacy and ethics. It’s important to balance both aspects. Business practices should be sustainable and take consumer rights into account. This includes taking responsibility for user privacy and data security, two issues that are more important today than ever.

How effective is targeted advertising?

Targeted advertising campaigns often translate into a higher return on investment (ROI) – a metric measuring how much a company earns for every dollar spent on advertising. A 2022 study shows that 37% of social media users bought a product because of targeted ads, and Facebook generated its revenue almost entirely through this marketing method.

Ads targeted to specific demographics and interests are more likely to generate customer interest, but it’s not a flawless solution.

Many internet users are well aware of the existence of targeted ads. Installing ad blockers and blocking third-party cookies has become standard among more tech-savvy users. People are increasingly concerned not only about their privacy but also the general "fakeness" of the internet, and the medium growing to be more brand than user-centered.

However, targeted ads continue to profit companies and aren’t going anywhere. It’s estimated that companies around the world spend about $521 billion a year on targeted advertising, and it’s very likely that this figure will increase.

Privacy concerns about targeted ads

Targeted digital marketing relies on user data, which raises concerns. Most people don’t like being followed and monitored to determine what products they will most likely buy.

Some internet users install ad blockers and go out of their way to avoid intrusive marketing. This "war on ads" is the result of growing awareness. Users know that digital marketing strategies exist, and as they become more aware, they’re less tolerant of intrusive ads following them everywhere.

Some say that targeted ads are downright creepy because they reflect their interests too well, and some even believe that your phone can be listening to you and use your conversations to match you with relevant ads. Tracking pixels (hidden graphics that send user data to external servers) and ads containing malware contribute to this growing distrust.

Governments around the world have also decided to address targeted advertising and have introduced regulations restricting advertisers in what and how they can collect. For example, users must be able to consent to third-party cookies and scripts. Privacy-focused companies such as Apple follow the "privacy first" trend and introduce opt-out features designed to limit the data collected by third-party companies.

Concerns about targeted advertising mean companies must adapt to remain relevant in the marketing world. Targeted ads are still effective, but campaigns should be transparent, data-conscious, and non-invasive.

How can you protect yourself from targeted advertising?

Targeted ads can be a nuisance, especially if you’re concerned about online privacy. Fortunately, there are several ways to get rid of them:

Use ad-blockers

Ad blockers do exactly what their name suggests: they block ads. They provide a way to free yourself from those annoying, flashy banners that often take up more space than the content you are interested in. Ad blockers are available as browser extensions and computer and mobile apps. They usually have built-in tracker blockers, which can remove tracking URLs or block tracking scripts responsible for following ads.

Keep in mind that ad blockers block all ads by default – including the ones on your favorite web pages, which are often created by passionate people who rely on ad revenue. It’s worth considering disabling ad blockers on the sites you want to support.

Clear your cookies

Clearing cookies means deleting stored data files that may contain some information about your browsing habits. This prevents tracking that uses already saved cookies but doesn’t prevent third-party cookies from being stored in the future.

You can clean cookies by going to your browser’s settings and searching for the "Privacy and security" tab. There, you can also block third-party cookies.

Use a VPN

VPN software can provide privacy by encrypting and routing your data through an external VPN server. Using a VPN makes it harder to tie you to your browsing activities. In the eyes of website owners, all traffic comes from the VPN server, along with its IP address and location. This makes it impossible for advertisers to find out what you’re viewing and interested in based on the IP address.