Study: 25 percent of advertisers can’t define ‘lookalike modeling’

Audience targeting is standard practice among advertisers, but a recent study reveals that one tool in the targeting arsenal, lookalike modeling, is returning more results among those advertisers and agencies that are using it.

In Digiday’s second “State of the Industry” report on audience targeting with eXelate, more than 450 digital marketing professionals were asked what they see as the most important advantages targeting offers. Lookalike modeling rose to the top.

But up to 25 percent of digital advertisers who said they target their ads online admit to not even knowing what lookalike modeling is.

Lookalike modeling is a process that draws on advertisers’ understanding of what the online behavior of their best customers entails.  Once these characteristics are identified, third-party data providers then match these profiles or “personas” with likely effective, prospective audience data sets leveraged from pools of modeling data available online. Marketers can then approach these prospects with relevant digital messaging that achieves better reach and retargeting.

The survey revealed that many within the industry are using the tactic with excellent results. Simple lookalike modeling results in double or even triple the results of standard targeting, according to the 30 percent of advertisers and more than half of agencies who reported using the tactic. The most proficient marketers who use it can achieve up to five times the return on their investment in audience targeting with lookalike modeling, the survey showed.

For leading advertisers who employ lookalike modeling, the results can be significant. The largest number of advertisers who use audience targeting already – 40 percent – told us that they saw 2 to 3 times the lift in performance from regular targeting methods when they added lookalike modeling. A lesser number – 26 percent– said that they haven’t seen any additional lift from the practice of lookalike modeling.

Advertisers who may not do lookalike modeling themselves, but who were among the majority we surveyed who say they do audience targeting, may outsource modeling detail to their agencies. We can assert this because nearly three-quarters of all agencies who do audience targeting – 73 percent – use lookalike modeling, and only 9 percent of them report not knowing what it is.

More than half of agencies who do lookalike modeling saw a 2 to 3 times lift in performance from this practice. Three percent of agencies see between 3 to 5 times the lift from ordinary audience targeting when they add lookalike modeling to their online advertising plans.

In other findings:

• Brands increased the use of audience targeting on all platforms by up to 15 percent from 2013

Third-party online data remains the most preferred data source for audience targeting for advertisers & agencies

First-party CRM data is growing in popularity with advertisers & agencies for audience targeting

• Advertisers and agencies trust either a combination of a DSP or a data provider to conduct their lookalike modeling

eXelate presented the full results of this survey at Digiday’s Brand Summit in Nashville this week. View the slideshare here.