Effectiveness

Targeting improves the effectiveness of advertising it reduces the wastage created by sending advertising to consumers who are unlikely to purchase that product, target advertising or improved targeting will lead to lower advertising costs and expenditures.

The effects of advertising on society and those targeted are all implicitly underpinned by consideration of whether advertising compromises autonomous choice.

Those arguing for the ethical acceptability of advertising claim either that, because of the commercially competitive context of advertising, the consumer has a choice over what to accept and what to reject.

Humans have the cognitive competence and are equipped with the necessary faculties to decide whether to be affected by adverts. Those arguing against note, for example, that advertising can make us buy things we do not want or that, as advertising is enmeshed in a capitalist system, it only presents choices based on consumerist-centered reality thus limiting the exposure to non-materialist lifestyles.

Although the effects of target advertising are mainly focused on those targeted it also has an effect on those not targeted. Its unintended audiences often view an advertisement targeted at other groups and start forming judgments and decisions regarding the advertisement and even the brand and company behind the advertisement, these judgments may affect future consumer behavior.

The Network Advertising Initiative conducted a study in 2009 measuring the pricing and effectiveness of targeted advertising. It revealed that targeted advertising:

• Secured an average of 2.7 times as much revenue per ad as non-targeted "run of network" advertising.
• Twice as effective at converting users who click on the ads into buyers

However, other studies show that targeted advertising, at least by gender, is not effective.

One of the major difficulties in measuring the economic efficiency of targeting, however, is being able to observe what would have happened in the absence of targeting since the users targeted by advertisers are more likely to convert than the general population. Farahat and Bailey exploit a large-scale natural experiment on Yahoo! allowing them to measure the true economic impact of targeted advertising on brand searches and clicks. They find, assuming the cost per 1000 ad impressions (CPM) is $1, that:

• The marginal cost of a brand-related search resulting from ads is $15.65 per search, but is only $1.69 per search from a targeted campaign.
• The marginal cost of a click is 72 cents, but only 16 cents from a targeted campaign.
• The variation in CTR lifts from targeted advertising campaigns is mostly determined by pre-existing brand interest.

Research shows that Content marketing in 2015 generates 3 times as many leads as traditional outbound marketing, but costs 62% less showing how being able to advertise to targeted consumers is becoming the ideal way to advertise to the public. As other stats show how 86% of people skip television adverts and 44% of people ignore direct mail, which also displays how advertising to the wrong group of people can be a waste of resources.