Since the inception of programmatic buying, media traders have used retargeting as a useful tool for direct response campaigns. A typical example of this is when tags are placed on different pages of the website and on the desired conversion (whether it be a thank you page load, a button click, or something similar).  Traders can then segment the audience through targeting users who have visited the webpage but did not yet convert. Teams typically see high conversion rates with this type of targeting tactic and are willing to pay higher CPMs since the conversion rate is so high that even with a higher CPM, it still results in a more efficient CPA than other targeting tactics in the campaign.

Seems pretty simple right?  Not exactly. Before media buyers set up a retargeting tactic like this and max out the spend by paying high CPMs, they need to ask themselves a crucial question: How likely it is that someone in the retargeting pool will convert without additional media exposure?

If there is a large number of users in the retargeting pool who are going to convert anyway, spending money to put more ads in front of them is a waste even though it may appear that it has the most efficient CPA. Below is an example where this is true; retargeting has a lower CPA, but the incremental conversion CPA is higher:

Retargeting Behavioral Targeting
Spend  $                                  10.00  $                                  10.00
Total Users Reached                                      1,000                                      1,000
Incremental Conversions Driven 10 50
Total Conversions Driven 100 60
CPA  $                                    0.10  $                                    0.17
Incremental Conversion CPA  $                                    1.00  $                                    0.20


The big question then, is how do teams know whether the retargeting conversions were driven by media or were going to happen anyway?  There are a few ways to do this:

  1. Analyse whether conversions were click-through or view-through. If you see that the retargeting conversions are not predominantly view-through, and have a click through/view through ratio similar to other targeting tactics in the campaign, it may mean that the users are being driven to conversion by clicking the ad and then going to site.
  2. Put some charity creative in the rotation to act as a control. Is the retargeting CPA between the charity creative and the regular creative equal? If it is, then the retargeting pool probably doesn’t need additional media exposure to convert, and the retargeting budget may be better spent on different targeting tactics.

Retargeting in programmatic is a great strategy and has its place in many campaigns, but before maxing out the tactic and paying sky-high CPMs for the media, the trading team should consider doing the two things mentioned above to get an idea of whether their retargeting audiences really need more ad exposure to convert.

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