Behaviorally-targeted advertising is more than twice as effective at converting users who click on the ads into buyers (6.8% conversion vs.2.8% for run-of-network ads) according to a new study by the Network Advertising Initiative (NAI).

Based on proprietary data from twelve major ad networks, the study found in 2009, behaviorally-targeted advertising pulled in an average of 2.68 times as much revenue per ad as non-targeted advertising.

"This study found that behaviorally-targeted advertising is a critical component of ad network, publisher and advertiser success," said report author Howard Beales, former director of consumer protection at the Federal Trade Commission.

"Behaviorally targeted ads sell for twice the price and offer twice the effectiveness of normal run-of-network ads, significantly enhancing the advertising revenue engine driving the growth of the Internet."

Highlights from the study include:

*The average relative cost of behaviorally-targeted ads in 2009 was 2.68
greater than that of standard run-of-network advertising. The weighted
average cost per thousand ad impressions (CPM) for behaviorallytargeted
ads was $4.12, as opposed to $1.98 for run-of-network
advertising.

*Behaviorally-targeted ads accounted for 17.9% of respondents’
advertising revenue, with revenue increasing from 16.2% in Q1 to
19.4% in Q4 2009.

*More than half of the respondents’ advertising revenue – 54.6% – went
towards the purchase of inventory and was therefore shared with
publishers and content producers to support their businesses.

"This study demonstrates the increasing significance of behavioral advertising to the economic model supporting free online content and services for consumers, as well as the need for careful consideration of policies that would affect the current online advertising marketplace and the innovation it supports" said Charles Curran, Executive Director of the NAI.