The Myths And Realities of Retargeting

“Networking” is a new column focused on the evolving roles of networks in online advertising.

Today’s column is written by Richard Frankel, President, of Rocket Fuel, Inc.

Richard Frankel of Rocket Fuel Inc.

  • He says there’s no doubt about it
  • It was the myth of fingerprints
  • I’ve seen them all and man
  • They’re all the same
    –        Paul Simon, Graceland

One of the most popular and fastest-growing display advertising tactics is retargeting, also known as remarketing. But as with any marketing technique, retargeting can be misused, misunderstood, and abused. So, as marketers dive in to leverage this promising technique, it’s high time to examine retargeting’s potential issues.

(1)   Retargeting doesn’t exist in a vacuum.

It’s a truism of marketing that advertising in multiple channels makes it hard to understand the unique effect of any particular channel. This issue is amplified online – a marketer may be using 2, 3, or even dozens of different tactics for engaging with audiences.  All of these tactics will drive customers to your site. Every time someone shows up, your retargeting partner will notice him/her, and retarget them later somewhere else on the web.  Some of these people will just show up because they know your brand, have a past history with the products, or are interested based on some other interaction.  They too will be retargeted.

Smart marketers are trying to really understand what the true lift is provided by retargeting. This is possible – and not even that hard – by using a careful test & control methodology. By doing this you can learn what the real value of retargeting is. Rocket Fuel did this recently with IMVU, a client that runs a virtual world and virtual goods marketplace. We measured the exact economic effect of our retargeting, and built a solid, fact-based business deal around those economics. We even had a bonus learning ; certain demographics had greater lift in relative value from our advertising. This allowed us to fine-tune our targeting and focus on higher-value audiences (within the total population of re-targetable people) for the client.

Best Practice: Invest in understanding the real incremental value that retargeting brings you.

(2)   When used with a wide mix of online tactics, retargeting’s value is often over-stated

If based on solid measurement we can determine the actual value of retargeting, one thing becomes clear. For online campaigns that use many display tactics, the actual value of retargeting is likely lower than you think. The reason is simple : all those tactics that are driving traffic to your site are seeing their value stolen by the retargeters, who grab the customers when they appear, and claim all the value when they show them the retargeting ad. Of course the retargeters are doing something – just not everything. The sites, behavioral targeters, ad networks, etc. who sent the audience to your shopping site in the first place are getting some of their “credit” stolen.

The solution to this problem is to carefully measure the relative value of each of your marketing tactics, and make sure that you assign proper weight to all your partners’ tactics. One thing that you’ll find is that retargeting isn’t as good as you thought, but all your other partners are in fact better. Doing this properly will create a fairer playing field among all your display advertising vendors, and increase your own long-term effectiveness as you get better at building media campaigns.

Best Practice: Make sure you do an online media mix/lift analysis to understand how all of your tactics are driving the activity you’re looking for, and adjust the relative value of retargeting.

(3)   Excessive competition for retargeting generates waste

The main reason that retargeting has exploded in the last few years is due to the emergence of exchanges like Yahoo!/Right Media and Google/DoubleClick Ad Exchange. These allow retargeters to efficiently find your customers on nearly the entire web. But this means that if you hire 10 firms to do retargeting, very likely they are all competing for the same people on those exchanges. This puts you (the advertiser/agency) in the undesirable position of competing/bidding against yourself for your audience. This will push up the prices you see rapidly, and in general make your buys less efficient. The solution for this is simple.

Best Practice: Use one primary vendor for retargeting. Don’t excessively bid against yourself. Test alternates with potential for improved performance/reach in limited and highly controlled tests.

(4)   If it walks like a duck and quacks like a duck …

There are a lot of companies that are touting new kinds of targeting. They pixel your site, study your audience, e-mail a pretty report, and deliver amazing results. Results that are as good as your other great performer – retargeting.  This should give you pause. In our experience, even carefully measured retargeting is usually the top performer in a campaign. For other tactics to be as effective as retargeting is certainly possible – we’ve seen it – but requires careful testing to make sure that you’re hitting a truly independent, unique audience.

Best Practice: Invest in understanding your targeting vendors’ tools, capabilities and practices to make sure you know what you’re getting! And don’t let new vendors mix in retargeting with some new, unproven technique.

(5)   Not all retargeting is created equal

With most retargeting efforts — especially those against very large retargeting pools (i.e. for sites with 1 million+ monthly visitors) — large audiences are treated as undifferentiated masses.  This is a fine approach, but you can do better. It is possible to sub-segment retargeting audiences to reach the best candidates in the pool. With the advent of more sophisticated exchange tools, one can even imagine paying different rates for better or worse potential ad viewers. Doing this takes smarts, effort, and technology – and not every player in the marketplace is capable of doing this.

Best Practice: Look for vendors with superior technology. Test, test, test.

Ultimately, experienced marketers know that they can only get so far with current customers, and have to, at some point, go get some new ones. While retargeting is a great tool (even with the issues I’ve outlined here), it can’t get you those new customers all by itself. So be smart, get the best value out of retargeting, and remember to keep some budget aside for acquiring new customers.

Follow Rocket Fuel, Inc. (@rocketfuelinc) and (@adexchanger) on Twitter.

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  1. Richard, great article! A question and a comment. In section 2, you suggest assigning weights to partner tactics. How do you do that in a non-biased way that avoids turning your biases into self-fulfilling prophecy? And the comment: in section 2, you emphasize that the value of re-targeting is overstated, and other tactics are better. In section 4, you state that retargeting is usually the best performer. While these statements might not be contradictory, I’d like to see more explanation on why they’re both true.

  2. Hi Jim,

    Good questions …

    (1) Non-biased tactic weighting is all about careful testing. If you do controlled testing then you should be able to weight tactics relative to scale and performance. I know — very easy to say, harder to do. But it is possible.

    (2) Ok, this isn’t a contradiction, though I understand how it sounds like one. My point is that, because retargeting could be claiming excess value vs. other tactics, it’s excellence might be relatively overstated.

    Here’s an example: on a particular campaign, you see 5x ROI for retargeting and 2x ROI for tactic X. If you can separate out the retargeting and give all the credit that is due to each tactic, you might learn that retargeting really should be 4.5x ROI, and Tactic X actually delivered 3x. So, retargeting is still the best, just not as much better as you initially thought.

  3. Richard, Well done! Implicit in your points, and worth some elaboration, are these simplified examples:

    1. Ad delivered by Targeter T drives Visitor V to your site. Logs indicates V has not been on your site in the last x months – your definition of “new” vs returning visitor. V does not convert on this first visit.

    Later, Retargeter R’s ad sends V back to your site and V converts. Typically, R gets credit while T gets none, even though T found this valuable visitor in the first place.

    Successful retargeting? Or the cumulative effect of advertising, which began with awareness? Do T & R share attribution 50-50? Is R worth 70 to T’s 30? Is there any objective way to determine attribution?

    2. Retargeter R1 pounds Visitor V with high-frequency ads for 72 hours following first exposure. In addition to being wasteful, this may have negative brand impact on V.

    Meanwhile, R2 uses predictive models that account for V being in research vs shopping mode and for a longer conversion cycle for the offer in general.

    R1 is racing to win attribution, and the consumer be damned. R2 takes a more scientific approach. If V is ever going to convert, R1 is probably going to win due to sheer volume. If V was in research mode early, however, and R2 keeps testing V’s interest over a longer period until V is ready to convert, R2 may yet win, assuming the advertiser hasn’t already alienated V with all those early ads!

    As you point out, much of this is poorly understood, and you really have to test carefully, one at a time. If you don’t, there is too much complexity and so many variables that there can never be a satisfactory solution. With relatively few advertisers all chasing the same cookies, everyone is a “retargeter” and attribution seems impossible.