Contextual vs behavioral targeting - how both can boost your ROAS

In this article, we look at the pros and cons of using contextual data and behavioral data to enhance the performance of your mobile ad campaigns

The origin of behavioral and contextual targeting

The mobile ad industry is shifting toward a privacy-first future, where user device IDs are increasingly less available to the advertisers who rely on them for user tracking and retargeting purposes. The move was sparked by the release of Apple’s ATT framework and the upcoming rollout of Android’s Privacy Sandbox initiative. Without device IDs, (or at least the user’s consent to access their ID), advertisers have less user data to hone in on.

Although this industry-wide development has been challenging for many brands, there are also unique opportunities that come with it. Advertisers and marketers can still craft impactful campaigns and test different strategies, but they have to decide whether to target dwindling ID-enabled users, no-ID users, or a mix of both. The approach here determines whether their campaigns leverage behavioral insights, or contextual ones – and both of which have their own pros and cons which we’ll look at now.

Behavioral targeting

Behavioral targeting shows ads to users based on their past behavior or activity within an app or website. In the case of in-app retargeting on iOS, an app must first get its users’ permission to access their device ID in order for the app to retarget the user later with ad placements in other apps. Behavioral targeting remains the only way to serve highly-personalized ads to your existing users. If the user has shown a previous interest in something, behavioral targeting can ensure you’re showing them ads that are most relevant to their interests.

When does behavioral targeting work?

If your brand is niche and wants to target a specific demographic of customers, then behavioural targeting will work best for you. Behavioral targeting allows you to deliver a more personalized ad experience for users, which can increase conversion rates, re-engage inactive customers and ultimately drive up your return on ad spend (ROAS).

The cons of behavioral targeting

With personalization, there’s a fine line between being helpful and being intrusive – and it’s a line brands are still learning to walk. If you irritate users with a bombardment of personalized ads, there’s a chance they will stop engaging with your ads, or revoke their consent to data sharing – which is what enables cross-app and cross-web tracking in the first place. Finding the right balance requires testing and analysis, which should always be approached with caution.

Another way in which behavioral targeting can negatively impact customers is when a user purchases a product, but continues to see ads for similar products as they move around online. This can be irritating and give your brand a negative image. Another downside is that because behavioral insights are the secret ingredient to running high-performing retargeting campaigns, the cost of retargeting existing users via behavioral targeting is naturally a little pricier - at least when compared to contextual targeting, which we’ll take look at now:

Contextual targeting

Contextual targeting is when you target users based on their current behavior, rather than their historical behavior. An example would be if a shopping app specializing in sportswear was to advertise its products on other sports-related apps and websites. They know that visitors of these sites enjoy sports, so they may want to buy sportswear too – making it a good place to advertise.

Contextual targeting can also be used to target potential customers via a range of basic, non-personal data points, such as a user’s timezone, or device type. A sportswear shopping app may deduce that iOS users have more purchasing power than those with cheaper Android devices for example, so it makes sense to show iOS users ads for the more expensive products they have to offer.

Although contextual targeting doesn’t offer deep data to guide you, the limited data points that are available can work well for certain industries and app verticals. Most importantly, contextual targeting still allows you to reach users who have opted out of online tracking. Serving the perfect ad may require more guesswork without deep data, but you can still reach these users without knowing their previous buying habits. This makes contextual targeting a good option for app businesses whose users have largely opted out of being tracked. It’s also useful for brands with smaller ad budgets because contextual targeting is relatively cheap.

When does contextual targeting work?

In an episode of the Apptivate podcast by the mobile retargeting specialists at Remerge, co-founder and CEO Pan Katsukis, says contextual signals are stronger in some niches than others, such as the food delivery market. If for example a user is browsing for cooking recipes or watching Netflix before dinnertime, they may respond well to ads from food delivery apps that can provide them with a nice meal from a local neighborhood restaurant.

The point is, contextual advertising can pair really well with certain app verticals – you just have to test out what works for you. Another benefit is that contextual targeting is 53% cheaper, says Pan, because advertisers don’t have as much competition when it comes to buying no-ID traffic. Interestingly enough, contextual targeting has been around for years and is the traditional way of reaching new audiences online.

But what do consumers think when it comes to contextual targeting? Research suggests that 73% of users find contextual ads more appealing. The same research also shows that these ads improve the consumer’s brand perception. While this may not translate to ad engagement, it’s an area where budgets are expanding - with brands increasing their contextual ad spend this year by 8%. In monetary terms, that’s almost one billion dollars during 2023 in contextual spend.

An example of contextual targeting

To get a real-world example of how brands can make use of in-app contextual targeting, we spoke with Ryan Mckenzie, the co-founder & CMO of Tru Earth, a leading eco-friendly household product company. Ryan implemented contextual targeting for Tru Earth’s eco-friendly laundry detergent, which they advertised within a new health and wellness app. Speaking from his experience, Ryan explains:

“Our advertisements were presented to users searching for, and interacting with sustainable living and eco-friendly content within the app. This targeting allowed us to reach a highly receptive and engaged audience that is more likely to resonate with our environmentally conscious brand values. The click-through rate (CTR) on our in-app advertisements increased by 35% compared to our previous, generic ad placements, and our overall conversion rate rose by 27%.”

He went on to explain that “the cost per acquisition (CPA) was reduced by 20%, resulting in a more efficient marketing strategy. Contextual targeting for in-app advertising has enabled us to not only engage with a relevant and interested audience, but also improve our return on investment (ROI) and contribute to the growth of our brand.”

The cons of contextual targeting

Nick Barnett, principal solutions engineer at Remerge, says that although contextual advertising doesn’t require extensive information on the user (which is particularly relevant in the era of user privacy), it’s not a solution for every channel. He explains: “contextual advertising relies on knowing what content is being displayed to the user, making it especially difficult in places like social media, where the content varies wildly between different creators.”

In this sense, contextual targeting does not work for all channels or brands. Another drawback would be if a user is playing a mobile game, and they are contextually targeted within the game by an ad that promotes another, similar gaming app. It’s unlikely that the user will be interested because trying a new game from scratch is less appealing than continuing one that they are already invested in. This is particularly true of level-based games with complex story arcs, because in-game progress requires a more long-term commitment.

Should you invest in behavioral or contextual targeting?

To conclude, choosing between behavioral and contextual targeting really depends on several factors, such as the type of product/service you are advertising, how niche it is, what budget you have and the tracking preferences of your users.

If you have a broad target audience, a small budget, or a low user opt-in rate for online tracking, the more ‘scattergun’ approach of contextual targeting will suit your needs. In contrast, if your target audience is niche, you have a reasonable budget and enough of your users consent to being tracked, then highly-personalized ads delivered via behavioral targeting is probably your best bet.

That said, if you have a product or service that can be advertised via a combination of contextual and behavioral targeting methods, then it’s good practice to experiment with both approaches. Behavioral targeting can help drive a higher conversion rate, but contextual targeting will allow you to reach new users for less money. To find the perfect balance, it’s important to work with a trusted mobile advertising partner such as Remerge, who can help you invest your mobile advertising budget in a way that will drive great results, as cost effectively as possible.