An ad of one's own

New services help advertisers micro-target their audience, but it has a cost.

An old maxim of marketing is that companies know half their advertising budget is wasted, they just don’t know which half. They traditionally tried to hit their target market by selling ads in context, next to the sort of content they assumed their customers would be consuming.

The web now makes it possible for advertisers to micro-target their audience through something called ad exchanges. In the time between clicking a website and waiting for it to load, an algorithm is deciding what you are worth. If you’re valuable to a company — based on your location, your web-browsing history, or other data stored in your IP address — their ad will appear on your page in a real-time bid-off against other companies that takes all of 200 milliseconds.

Josh Dreller, VP of Chicago-based Fuor Digital, calls it an industry shift to buying audiences, rather than websites. While ad exchanges, the platforms on which the bidding happens, aren’t new, the technology making them work is.

In June, Google bought a de??mand-side platform (DSP) called Invite Media, the best program of its kind on the market. DSPs amalgamate numerous ad ex??changes, making it possible for advertisers to access hundreds of thousands of ads per second in one centralized location.

“With DSPs, you are casting the widest net out there to target people,” says Josh Dreller, whose company runs a DSP for advertisers. “If you want to target BMW users, instead of buying a million ad views on Yahoo, now you can target a million people who looked at BMW ads in the last 30 days on the sites they visit.”

Dreller says ad networks, the older model for buying and selling ads, require a back-and-forth process between publishers and advertisers that takes anywhere from a day to a week. Now, it takes him minutes to program his DSP to target specific users, place a bid and upload an image.

The downside is, advertisers lose the benefit of affiliating their brand with a specific site. “If you’re a new online bank opening, where better to be than The Wall Street Journal?” says Dreller. “With ad exchanges, you could be showing your hunting and camping gear to someone on a toothpaste website.”

That is why financial corporation Capital One dealt directly with publishers when launching an advertising campaign for their rewards card, Aspire. The company’s senior director of brand and marketing, Clinton Braganza, says they are confident their readers go on certain sites, and didn’t want to compromise creativity by following them to others.

“We’re doing wallpaper ads on Yahoo and banners on The Globe and Mail,” says Braganza. “By focusing on the target sites of consumers, you sacrifice how your message is communicated.”

But at Montreal-based BLOOM Digital Platforms, which created the first and only Canadian DSP to have access to inventory on Google’s ad exchange, DoubleClick, VP Vlad Stesin predicts even big publishers like Yahoo will switch to exchanges.

Though BLOOM’s technology, AdGear, also includes third-party software enabling advertisers to work with publishers the old way, Stesin says the new technology is less costly and too powerful to ignore. “We can’t assume travel ads have to advertise on travel sites only,” Stesin says. “As a consumer, a lot of things make you react to an ad, and it’s the job of advertisers to figure out what criteria yield the best result.