Combining Ad Targeting Techniques: Evidence from a Field Experiment in the Auto Industry

Retargeted advertising that tries to entice potential customers back to a website is widely used by advertisers and has often replaced more traditional forms of targeting, such as contextual targeting that tries to match ads to website content. However, existing research has not investigated the extent to which these different targeting techniques compete with or complement each other. To investigate this, we conduct a large-scale field experiment with an automobile manufacturer to investigate how retargeting meshes with more traditional techniques of contextual targeting online and in turn how that should affect ad content. We investigate this using three different measures of online advertising effectiveness: website visits, engagement, and soft conversions. We find that combining contextual targeting and retargeting is more effective for all three measures. However, to unleash this effectiveness, marketers have to pay attention to the ad content in their retargeted ads. We find that when combining retargeted advertising with contextual targeting, ads that prompt users to customize an offering are the most effective. Last, we provide empirical evidence for understanding the underlying mechanism associated with our findings and replicate those findings with a laboratory experiment. This paper was accepted by David Simchi-Levi, marketing. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.02310 .