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Behavioral vs. contextual targeting: the difference explained

December 15, 2022
5 minute read

Marketers have relied on behavioral targeting for years to leverage data about consumer behavior and create relevant messages that resonate deeply and convert. With the looming deprecation of third-party cookies, it’s about to become a lot more challenging to use behavioral targeting to reach customers. That’s where contextual targeting comes in. Let's take a moment to break down both targeting methods.

Takeaway

Contextual and behavioral targeting both have their benefits, but contextual advertising holds the keys to the future of advertising in a post-cookie world.

Behavioral versus contextual targeting

What is contextual targeting?

Contextual advertising is not a novel concept. In fact, placing the most relevant ads in the best context or place to be seen, read, or heard is pretty old.

This form of ad targeting serves the audience with contextual ads based on a website’s content. A good example is an ad for pots and pans on a recipe blog. Advertisers use keywords or topics they wish to target and set their ad campaigns to show ads on the display network. Then, Google analyzes website content and selects keywords, topics, and locations that match.

"Ultimately, the idea of contextual is to reach audiences whose behavior and interest align with the content the publisher is putting out there," said Rachel Hirschl, VP of Advanced TV & Programmatic Media at Power Digital.

Hirschl provided the following examples of how brands can use contextual targeting to reach audiences where they are:

  • An avid sports fan is likely checking ESPN, Yahoo Sports, etc. daily.
  • Your financial/business person will likely consume industry and financial news regularly.
  • A wellness-loving foodie is searching for and reading healthy recipe ideas.

"Brands should want to test and be aligned with credible, relevant content that will complement the messaging, storytelling and theme of the ad being served," she said.

There are three levels of contextual advertising:

  1. Category contextual targeting: Ads are targeted to pages based on the pre-assigned categories of the web pages.
  2. Keyword contextual targeting: This level of contextual targeting focuses on serving digital ads to pages based on specific keywords.
  3. Semantic targeting: The most advanced form of contextual targeting, semantic targeting uses machine learning and AI to read a web page’s content, understand the topics (i.e., the context), and serve ads that match it.

What is behavioral targeting?

Behavioral targeting is a method that shows ads that resonate with the audience based on their online activity. This precise targeting method uses third-party cookies to serve the target audience the most relevant content based on past habits and preferences.

"As third-party cookie data continues to deprecate, brands need to develop alternate strategies to reach target audiences at scale in places that are relevant to the ad placement," said Hirschl.

For example, if a consumer searches for a pair of jeans on an e-commerce website, the brand can display appropriate ads on web pages across the internet, not just on their own website. This allows for more precise targeting that increases the likelihood of a purchase.

Behavioral targeting plays a key role in retargeting consumers in two ways. One is reengaging with them after they've interacted with your brand but left without making a purchase. The other is by remarketing and re-engaging customers based on their prior purchases.

Although behavioral targeting has many benefits, it can also go wrong. Consider the following examples:

  • You lend your phone to someone who visits an online store. Now you're suddenly seeing ad after ad for that store, even though you're not interested in it.
  • You're looking for a gift for your nephew's birthday. You research children's toys online, but end up buying the product in a physical store. You continue to see advertisements for Lego for weeks.

Contextual vs. behavioral targeting

Contextual advertising works based on keywords, topics, and other forms of relevant pages and content. Behavioral advertising relies solely on consumers’ online behavior, such as the websites they’ve visited, time spent on a certain web page, and website engagement.

What are the benefits of behavioral targeting?

A behavioral targeting strategy has several benefits for both the marketer and the consumer. Some of the most significant benefits of this digital marketing strategy include the following:

1. Improved consumer engagement

When you understand consumer habits based on their past behavior, you can serve ads to users based on touchpoints or products you know they’ve already engaged with or are interested in engaging with. This increases the likelihood of an ad campaign converting to a sale.

Hirschl noted that "Having a diversified targeting strategy will drive greater connectivity with customers, and incorporating contextual is a classic strategy that is resurfacing with a vengeance. Marketers are increasingly familiar with using new ID solutions and targeted scale as levers in digital advertising."

On the other hand, targeting methods without behavioral intent will stifle engagement.

2. Higher sales

According to Indeed, companies that use behavioral audience targeting typically see more sales. That’s because they can easily alert consumers of relevant products based on items they've previously shown interest in, increasing the chances they'll make a purchase.

What are the benefits of contextual targeting?

There’s a resurgence in the contextual targeting space as marketers prepare for the deprecation of third-party cookies. Some of the top benefits of this methodology explain why:

1. No cookies or personal information required

Consumers have grown increasingly leery of handing their personal data over to brands. In fact, a recent survey found 60 percent of consumers don’t trust brands with private data. With contextual advertising, you don't need to worry about cookies or data. This allows you to serve contextually relevant ads without intrusive data strategies.

With contextual ads, you also avoid privacy concerns because you are not invasively targeting consumers based on data.

"Contextual has been on the rise since the first round of cookie announcements by Google and it will only grow from here," Hirschl said. "Publishers, marketers, agencies and ad tech platforms are preparing in real-time for this gravitational shift from reliance on third-party and privacy-rich data to new methodologies that allow advertisers to become more targeted and intentional about their spend, compared to broad reach media."

2. Context leads to relevant content

Relevancy is becoming more and more important to consumers who are overwhelmed with content every time they're online:

  • Around 64 percent of consumers say it’s important that brands give them relevant, personalized offers. But brands are not delivering.
  • About only 40 percent of consumers perceive the communications they receive as relevant.
  • When an organization does not personalize the customer experience, about 45 percent of consumers say they will not purchase or be less likely to buy from them.

Contextual ads also help fight ad fatigue. Consumers see up to 10,000 ads daily, meaning ad fatigue is at an all-time high. People can quickly become annoyed with an influx of ads they're not interested in. When you serve relevant ads, you're serving more valuable ads to an interested audience.

3. Cost savings

Did you know contextual ads are much cheaper than other forms of advertising? Data collection requires many more tools, strategies, software, and resources. With contextual advertising, you can serve relevant content and ads to the audience without additional spending on data collection and privacy regulations compliance.

4. Increased purchasing intent

Since contextual targeting places your ad creatives alongside related content that your audience is interested in consuming, they are more likely to be receptive to your messaging. This gets you closer to delivering the ideal message at the perfect time and place.

In fact, studies show that consumers are more receptive to contextually relevant ads. When contextually relevant ads were served to audiences, purchasing intent was 63 percent higher than when behavioral ads were served.

The future of contextual advertising campaigns

As we enter a new era in which advertisers can no longer depend on third-party cookies, the future is contextual. Two-thirds of advertisers believe contextual targeting will be more important in a cookieless world, and 72 percent of respondents say they’re exploring various solutions and planning to implement them in the next 12 months. What’s more, spending on contextual advertising is expected to reach nearly $3 billion by 2023, up from $125.79 billion in 2018.

This form of targeting faces less legal exposure to user tracking, data collection, or other forms of direct targeting, creating a safer experience for advertisers concerned about regulatory compliance.

"In highly regulated categories, having a contextual strategy will ensure privacy is not being infringed upon in industries such as (but not limited to) pharma, alcohol, or financial services," Hirschl said.

Marketers shouldn’t think that the demise of behavioral targeting will negatively impact their revenue, though. A recent poll found that 45 percent of publishers saw no significant benefit from behavioral ads, and 23 percent said they actually caused a drop in revenue.

Related Reading

https://funnel.io/blog/setting-up-your-first-party-data-strategy

https://funnel.io/blog/the-end-of-third-party-cookies-is-near

https://funnel.io/funnel-tips/third-party-vs.-second-party-vs.-first-party-data