A hot new feature in the online advertising world: retargeting. It’s about showing ads specifically to people who have visited your website before. For example, someone comes to your site and views certain key pages, indicating some interest, but then doesn’t place any orders. Maybe he got distracted, had some unanswered questions, or didn’t need your offering quite yet, but maybe later. This person is now a very qualified sales lead. “Retargeting” features allow you to show ads to that person as he browses other websites.

For example, the next time he browses his favorite online magazine or news site, he may see an ad from you inviting him to come back. You know what he did the previous times he was on your site, so this ad can be very specific, maybe even include special offers to get this person to come back. Click-through and conversion rates are very likely to be much higher than for ads shown to people who’ve never been to your site.

How does this work? You partner up with a retargeting network such as fetchback.com (an aggregator of various ad networks that specializes on retargeting). As a visitor comes to your site, you’ll place a cookie that will now identify him as he browses other websites that belong to the ad network.

How is this different from advertising on Google Adwords or classic ad networks? You don’t need to specify targeting criteria. You target anyone who’s been to your site before. No need to filter it any further.

How is it priced? This depends on the ad network, but flat-rate pricing seems to be most common for relatively low-traffic sites. For example, we’ve seen introductory offers for sites with less than 20K unique visitors per month where $500 for at least 3 months will show ads to each of your <20K visitors as they browse other sites. Your actual CPM/CPC costs will vary based on the number of visitors and their browsing behavior once they leave your site. Ask your ad network what % of your visitors they expect to be able to cover (usually 50-70%).

When does this make sense to use? You’re investing a flat-fee per month in return for an increase in your conversion rate, so you should calculate what % increase in your conversion rate you need in order to justify that investment. The two most critical assumptions in those calculations are: 1) the percentage of your existing orders that come from return-visitors (depends on the business, we’re assuming 20% below), and 2) the percent increase to that rate delivered by retargeting. For the latter: Retargeting networks often see those go up by 50% or more. Let’s do the math, comparing 3 different scenarios with 3 different increases in the return conversion rate:

We see now that an increase of 15% or above would be profitable for this business, and most ad networks will confidently exceed that number. So for the example above, retargeting is definitely something worth trying. Here is the spreadsheet containing the above calculations. Feel free to adapt this for your own purposes.

This entry was posted on Wednesday, April 15th, 2009 at 7:42 am and is filed under Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.