Retargeting Ads: How They Work and Their Consequences for Users

The Neeva Team on 05/05/21

It began around 2010: People who looked at shoes on the Zappos website started noticing ads for those exact same shoes following them around the web. By that time, most internet users were used to seeing personalized, or “targeted” ads based on their browsing habits. But being hounded by a specific product was new. This concept, known as retargeting, is now extremely widespread—it’s no longer a surprise when a product starts following you around as you browse the web. But how did we get here?

What is ad retargeting?

Retargeting is a form of targeted advertising in which you are served display ads for specific products or brands that you have previously viewed. Instead of showing you a sidebar or banner ad for a product you might be interested in (based on the types of websites you tend to visit), retargeting reminds you about something you’ve actually viewed before.

This type of advertising can be highly effective in persuading you to make a purchase. According to Criteo (the company that helped Zappos show its first retargeting ads back in 2010), retargeting ads can increase sales by 43 percent.

For this reason, retargeting has become a crucial tool to turn website visitors into actual customers. Whereas targeted advertising helps drive traffic and introduce new customers to products that they might be interested in, retargeting helps get those customers to actually buy.

How does ad retargeting work?

Retargeting uses the same technology as other forms of targeted advertising: cookies. Websites contain a small amount of code known as a pixel tag (or pixel for short) that leaves a cookie on your browser every time you visit a website. When you visit the page for a specific product—say, a set of steak knives—a cookie will be placed into your browser.

If the steak knife company pays for advertising in a network that uses retargeting technology, you’ll see ads for the steak knives on any participating site. The next time you’re reading the news or checking your social media feed, the site will know to show you the steak knife ad thanks to the cookie it dropped on your browser.

Websites are now required to get your consent before placing cookies (more on that below), but most of us just hit “accept” and forget about it. If you do take the time to adjust your cookie settings for that site, you’ll likely be met with warnings that disabling cookies could affect the site’s functionality.

A retargeting “pixel” can capture more than just whether or not you visited a page: It can also collect information about whether you placed an item in your cart or initiated check out, which would make you more valuable for retargeting.

Sites that host Facebook ads or Facebook “Like” buttons, for example, contain a “Facebook pixel” that collects information about site visitors such as IP address, web browser, page location, referrer, button clicks (and where those buttons led to), and other information like values entered into fields like “email address.” This information allows companies that use Facebook advertising to target specific users based on their behavior, in a process called conversion optimization. Google also utilizes its own ads technology to collect information about users and target them for ads.

Retargeting vs. remarketing—what’s the difference?

The terms remarketing and retargeting refer to the same concept; though some advertising firms use the terms to speak to different channel applications of that concept. The term remarketing may be used to refer exclusively to email campaigns that use the same techniques as retargeting, but send product reminders in an email rather than as a display ad. This form of marketing is less common than display ad retargeting.

Google uses the term remarketing interchangeably with retargeting, with a preference for the former—perhaps because it sounds more palatable to the layperson’s ear.

What are the different types of retargeting?

Over time, retargeting campaigns have evolved to encompass a few different strategies. These are some of the key concepts to know:

  • E-commerce cart retargeting (ECR): When you leave a product in your shopping cart and then receive a reminder ad a few hours or days later, it’s ECR.
  • Identity matching: When you see the same retargeting ad across different devices and platforms— for example, on your desktop browser, your phone browser, and in apps—that’s called identity matching.
  • Generic retargeting: Some advertisers use this term to refer to ads directed to a site’s landing page, rather than a specific product. Others use the word “generic” to refer to ads that do not change based on additional information about the user.
  • Dynamic retargeting: Advertisers that use the first definition of generic retargeting call product-specific ads dynamic retargeting. Other advertisers use dynamic to describe how they create ads that are further personalized based on user behavior. This type of dynamic retargeting might involve indications that a product is on sale, offers of a discount code, or changing the way the ad looks.

Is ad retargeting effective?

“Here’s the dirty secret of ad retargeting: It really works,” says Sridhar Ramaswamy, cofounder of Neeva. Despite the annoyance it creates, retargeting delivers on its promises to marketers:  it drives more purchases.

According to Criteo’s guide to retargeting, “Shoppers need to be exposed to an ad several times before they’ll buy something.” A 2017 survey by Episerver supports this notion, finding that, when visiting a retail website for the first time, 92 percent of consumers are not there to make a purchase. Instead, they’re more likely to be searching for a product or service (45 percent), comparing prices or other factors (25 percent), or looking for information about a store (10 percent).

To get those website visitors to actually make a purchase, many companies rely on retargeting, and it seems to work: Criteo claims its partners see an average of 13 times return on ad spend.

Part of retargeting’s success may stem from the “mere exposure” effect, in which repeated exposure to something that you don’t have a negative association with actually increases your preference for the thing in question. In practice, that means that retargeting can not only help push you to make a purchase you already had some intent to make—it can also help create purchase intent.

Imagine: An ad for a pair of sneakers catches your eye in your Instagram feed, and you click the ad to view them on the brand’s website. You like the sneakers, but you have no intent to buy them at this moment in time, so you exit the page and try to forget about them. By retargeting you with repeated follow up ads for these particular sneakers, the brand can actually build your intent to buy the sneakers—leading you to purchase something you don’t need, and perhaps cannot afford.

Neeva’s research illustrates just how frequently the above scenario happens to consumers. In a 2019 survey of Neeva users, 62 percent reported buying products after seeing a retargeting ad. And the majority (56 percent) further reported that, had they not been retargeted, they wouldn’t have made those purchases at all.

Retargeting doesn’t always work, however. It turns out that timing is key. According to a 2020 study, users who received an e-commerce cart retargeting (ECR) ad within 30 to 60 minutes of leaving an item in their cart were less likely to buy the product than users who were not served any retargeting ads at all. In contrast, users who received an EGR ad within one to three days were more likely to purchase the product. The study authors likened early ECR ads to a “too-insistent salesperson who desperately wants customers to buy but actually annoys them and ends up with fewer sales.” Late ECR ads, however, appear when users’ memories of a product have started to fade, so the ad feels less pushy, and more like a reminder.

Can retargeting work without cookies?

Retargeting relies heavily on third-party cookies—that is, cookies placed by an advertising partner. In the past few years, there have been some threats to the existence of third party cookies, due to both privacy concerns from users and relevant legislation.

  • Apple began blocking third-party cookies on its browser, Safari, starting in 2017.
  • In 2018, the European Union introduced the General Data Protection Regulation (GDPR), which requires advertisers to get users’ consent to place third-party cookies. The GDPR applies to any company that collects personal information about people who live in the European Union, regardless of where the company is based. (When you visit a website and see a pop-up announcing “this site uses cookies,” you’re seeing the effects of GDPR.)
  • In 2019, Mozilla’s Firefox announced that it would block third-party cookies.
  • Google Chrome is slated to phase out by 2022.

Does this mean retargeting is over? Not necessarily. Chrome will continue to support first-party cookies, allowing websites to gather information about their own visitors which can then be used for advertising purposes. Chrome is also experimenting with Federated Learning of Cohorts (FLoC), a technique that targets groups rather than individuals. It’s not quite clear how the mechanics of retargeting might change, but it’s hard to imagine advertisers giving up on retargeting entirely.

What are the consequences of ad retargeting?

Retargeting may be hailed by advertisers, but users have many concerns. Among them:

  • Trust: Retargeting ads alert users to the fact that their browsing habits are not private, feeding into a general sense of unease. Nobody likes to feel surveilled, and the more that users are reminded that they are being tracked, the less trust they have in the internet in general.
  • Diminished utility: It’s possible that retargeting ads may create a conflict of interest, where ad-supported services prioritize retargeting over their service to the user.
  • Spending habits: The effectiveness of retargeting implies that users sometimes end up buying things that they wouldn’t otherwise. This might be a boon for marketers, but it presents some danger to users who may be coaxed into buying something that they can’t afford, resulting in increased consumer debt or reduced savings.
  • Privacy: Dynamic retargeting requires collecting a lot of data about users—and storing it. In 2016, Criteo admitted to keeping up to 13 months’ of data relating to viewed products in its user profiles. Google, for its part, is notorious for how much it knows about its users. With no real sense of how their data is being used or how secure it may be, many users have concerns about this level of data collection.



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