Targeted online advertising

Targeted online advertising uses data about what a user does online, such as the pages they read, the words they search for and the adverts or products they click, to show them adverts that match their interests. The business is aiming at a segment of customers whose behaviour suggests they are likely to buy, rather than at everyone using the internet.

For example, a shop that sells dance shoes pays a social media platform to show its advert only to users who have watched dance tutorial videos and follow dance schools, because that behaviour suggests they are likely to want the product.

How it works

• Platforms collect data as users browse, search and click, often using cookies (small files stored on a device that track activity).
• The data builds a picture of a person's interests, which the platform matches to the business's target segment.
• The business sets the advert and its budget, and the advert appears in the feeds or on the pages of users who fit that picture.

It does not reach every customer. It only reaches users whose online behaviour suggests they are in the target segment, so people with different habits may never see it.

Benefits and drawbacks

• Privacy concerns: customers may not realise their data is being collected and can feel watched, which can damage trust in the brand.
• Annoyance: if an advert follows someone across every site, or is repeated too often, they may be put off the business altogether.

Targeting usually gives a better return per pound than untargeted advertising, but only while customers accept it, so the amount and frequency of adverts matters.