Behavior versus Context

I think the Internet is slowly becoming the medium of choice for almost all marketers.

Why?

Because it has the reach, the frequency, the measurability, and the ability to target like no other medium. And its incredibly easy to buy. More reach. More frequency. More accountability. More efficiency. Easier to buy. How can you beat that? You can’t.

Someday advertisers and their agencies (i have some doubts about the latter) will wake up to this fact. The ones who have woken up already are doing great. The ones who haven’t are continuing to waste the proverbial half of their advertising dollars they know don’t work.

There is a lot of noise these days about paid search. And for good reason. Google is a wonderful story. It’s headed to a much anticipated IPO. Yesterday, Yahoo introduced its own proprietary search service and is going after Google hard. So is Microsoft. And they should. Because paid search works. It has reach, frequency, is incredibly measurable, its efficient, and its easy to buy. In less than two years, paid search has become a $2 billion business and has captured 25% of the Internet ad market. Some say that paid search is going to be a third of the Internet ad market this year. And I don’t doubt it.

But paid search will start leveling off and as it does, the leading providers are offering contextual advertising networks as the next big thing. If you buy the keyword “mortgage” on Google, why not buy an ad on every Internet page that has the word “mortgage” on it. That’s the idea behind Google’s AdSense and other contextual networks that are popping up to service this market.

But contextual targetting may not be the best the Internet has to offer. If someone types in “mortgage” you do know that they are interested in a mortgage. But running an ad for a low rate mortgage on a news story about mortgage foreclosures in low income neighborhoods doesn’t make any sense.

Contextual advertising doesn’t tell you much about a person’s behavior. Do they really want to take out a new mortage because they are on a page that is talking about mortgage? Who knows.

But what if a person has been getting mortgage quotes every day for the past month? That’s behavior. And I think behavior is a better indicator of purchase intent than context will ever be.

So I think the next big thing in Internet advertising will be behavioral targetting. And I think it could be as big or even bigger than paid search. I’ve made a bet on this market with my investment in Tacoda Systems and I am excited to watch the market for behavioral targetting develop.