Is Combining Contextual and Behavioral Targeting Strategies Effective in Online Advertising?

Online targeting has been increasingly used to deliver ads to consumers. But discovering how to target the most valuable web visitors and generate a high response rate is still a challenge for advertising intermediaries and advertisers. The purpose of this study is to examine how behavioral targeting (BT) impacts users' responses to online ads and particularly whether BT works better in combination with contextual targeting (CT). Using a large, individual-level clickstream data set of an automobile advertising campaign from an Internet advertising intermediary, this study examines the impact of BT and CT strategies on users' click behavior. The results show that (1) targeting a user with behavioral characteristics that are closely related to ads does not necessarily increase the click through rates (CTRs); whereas, targeting a user with behavioral characteristics that are loosely related to ads leads to a higher CTR, and (2) BT and CT work better in combination. Our study contributes to online advertising design literature and provides important managerial implications for advertising intermediaries and advertisers on targeting individual users.