Personalized Online Advertising Effectiveness: The Interplay of What, When, and Where

Firms track consumers’ shopping behaviors in their online stores to provide individually personalized banners through a method called retargeting. We use data from two large-scale field experiments and two lab experiments to show that, although personalization can substantially enhance banner effectiveness, its impact hinges on its interplay with timing and placement factors. First, personalization increases click-through especially at an early information state of the purchase decision process. Here, banners with a high degree of content personalization (DCP) are most effective when a consumer has just visited the advertiser’s online store, but quickly lose effectiveness as time passes since that last visit. We call this phenomenon overpersonalization. Medium DCP banners, on the other hand, are initially less effective, but more persistent, so that they outperform high DCP banners over time. Second, personalization increases click-through irrespective of whether banners appear on motive congruent or incongruent display websites. In terms of view-through, however, personalization increases ad effectiveness only on motive congruent websites, but decreases it on incongruent websites. We demonstrate in the lab how perceptions of ad informativeness and intrusiveness drive these results depending on consumers’ experiential or goal-directed Web browsing modes.