In 2019, [theDutch public broadcaster] ran an experiment with 10 different advertisers, including American Express, to compare the performance of [online] ads shown to users who opted in or out of being tracked. On the most important metric, conversions—the share of people who ended up taking the action the advertiser cared about, whether it was adding an item to their cart or signing up for a subscription or credit card—contextual ads did as well or better than microtargeted ones.
“When do people want to buy a Snickers?” said van Bentheim, recalling a conversation he had with someone who worked at an ad agency. “It’s not because someone is in a specific age or in a specific region or has a high income; it’s because they are hungry and they are looking at food at that moment.”
The issue at hand is which model of advertising works better: micro-targeted (advertising to individuals because The Algorithm has determined them to be in a certain demographic segment), or contextual (advertising based on what an an ad will be seen next to). For going on two decades now, Google and, later, Facebook have been pushing the former at the expense of the latter, primarily because they’re the data gatekeepers that make the former “work”… and also because neither company really has any way of making money outside of this.
There’s only one problem: micro-targeted advertising fails to produce substantial conversion gains (i.e. how many people click on an ad) pretty much consistently every time it’s studied. Where it does show gains they’re in the single digits, and are arguably offset by all the downsides to targeted advertising, which run the gamut from “annoying” (remember Tumblr ads?) to “destroying democracy as we know it maybe?” (erosion of privacy, clickbait’s negative influence on journalism).
The upside to all of this, is that the slow-but-inexorable hand of change is on its way; everything from browsers nixing third-party cookies to jurisdictions like the EU tightening privacy regulations. The days of open-slather back channel data sales are (hopefully) coming to a close, though don’t expect Google and Facebook to go down without a fight…