Does Personalized Advertising on Social Media Actually Work?

You might feel like your social media accounts are stalking you.

You mention cat food once, and the next thing you know, cat food ads are popping up all over on your Instagram, Facebook, and TikTok feeds.

Targeted ads like this are a firm favorite with brands that want to provide highly personalized recommendations because they tap into consumers’ individual wants and needs.

There are a variety of social media platforms that empower brands to deliver personalized ads at scale — but do they work? Or are they more creepy than captivating?

What Are Personalized Ads and How Do They Work?

Personalized ads collect user data from around the web and use it to identify what products and services someone is likely interested in. These ads can help shoppers discover new products or remind them about items they’ve already shown an interest in.

Google can capture data from all kinds of sources, including web searches, videos watched, installed apps, and even locations visited and tracked by Google Maps.

In the same vein, Facebook collects data from its suite of social media apps, including the pages you like, recent searches, and personal profile information.

Brands can also install a Facebook Pixel on their site to track visitor behavior — such as pages visited and the actions taken — and serve ads based on that behavior.

The Data Privacy Challenge

While the referenced data is great information for brands to have and use, some consumers may be frustrated by these tactics — ultimately becoming wary of ad personalization because it indicates that their data has been used to alter their news feeds.

In fact, data privacy has become such a big concern that Apple has disabled automatic data collection in its iOS 14 update, and Google is planning to follow suit very soon.

It’s becoming more difficult for brands to get the insightful consumer data that was once at their fingertips.

Instead, brands must explore other ways to get the information they need to create unique experiences, like capturing first-party data and proactively speaking to their customers.

This switch has seen ad costs increase, too. A report from The Center for Data Innovation found that clothing brand Sozy saw ad acquisition costs triple from $30 to $90 per customer — and furniture company Steelcase saw its cost-per-click (CPC) on Facebook ads go up by 90%.

Given these conditions, brands need to be more intentional about the data they collect and how they use it to attract and convert customers.

The Benefits of Personalized Ads

In the words of Facebook: “personalized advertising provides the best experience for people … Personalized ads help people access services, discover new products, and receive deals from the brands they care about.”

Adding a personalized ad here and there has plenty of benefits for brands, too:

Replicate the In-Store Experience

When a shopper walks into a physical store, they’re greeted by a real-life sales associate who can offer relevant product recommendations. This is harder to achieve online since the human connection is indirect — if not absent. However, a personalized ad uses a shopper’s interests to serve recommendations just like an in-store sales associate would.

Influence Purchase Decisions

According to research commissioned by Innovid, 43% of respondents said it was important that the online ads they see are personalized, incorporating geography, interests, and behaviors. Although some consumers are more skeptical of ads than ever before, when given the choice between generic and personalized content, it’s likely they’ll choose the latter.

Boost Sales

The warmer shoppers are toward your brand and products, the easier it is to sell to them. As a result, targeted ads can shorten the path to purchase because less persuasion is necessary. Instead, consumers are being served ads for products they’ve already shown an interest in or that provide a solution to a specific pain point they have.

Increase Engagement Levels

It’s a no-brainer that shoppers are more likely to click through on an ad they’re interested in. This boosts engagement levels and shows advertising platforms that your content is useful. In response to this, your ad will be shown more consistently at a more competitive rate to interested users — increasing impressions and overall engagement levels.

Increase Customer Retention

Attracting new customers is one thing, getting them to stick around is another. With so much competition today, it can be tricky to continue to provide value to existing customers. Serving them a personalized ad based on their past purchases, main interests, and behavior will increase the likelihood of loyalty.

The Return on Investment (ROI) of Personalized Ad Campaigns

Research by McKinsey shows that personalization can deliver five to eight times the ROI on marketing spend — and lift sales by 10% or more. A study by Epsilon confirms this, highlighting that 80% of consumers are more likely to make a purchase when brands offer personalized experiences.

These figures are similar around the globe. According to Instapage, 88% of U.S. marketers have seen measurable improvements due to personalization, with more than half claiming a 10% lift or more.

The situation in France and Germany is slightly different, simply because consumers have a different outlook on ad personalization. One YouGov poll revealed that the large majority of shoppers in this part of Europe believe brands shouldn’t target ads based on income (87%), health information (87%), or voting history (84%).

A Million Ads’ global consumer report revealed that 65% of marketers in the U.K. consider personalization to be a high or very high priority for their advertising strategy. According to the research, brands in the beauty (34%), entertainment (31%), and finance (26%) industries are seeing the most success with personalized advertising.

When asked which brand metrics a personalized ad affected the most, respondents cited brand awareness (74%), brand consideration (73%), and purchase intent (73%) as the top areas.

5 Steps Brands Can Take To Develop Effective Personalized Ad Campaigns

1. Be More Specific

Ad technology today is incredibly advanced, allowing brands to get really specific with the people they target. The more you hone in on whom you want to reach, the easier it is to personalize your messaging and connect with the right people.

However, on the flip side, Gartner reveals brands that don’t properly implement personalization — and cross the line of being creepy — are at risk of losing up to 38% of their customers.

The solution lies with using the right information, not all the information you have on your customers.

Segment customers based on the actions they take on your site, their life stage, and how much they’ve interacted with your brand. For example, you can group together shoppers who have all contacted support more than once, or serve an ad to people who have recently gotten married.

2. Mirror the Customer Journey

One of the simplest ways to succeed with personalized ads is to create campaigns for each stage of the sales cycle. Serve shoppers who have just discovered your brand with information about who you are and the products you sell, provide those who have visited a number of product pages with relevant product suggestions, and retarget existing shoppers with a highly personalized ad based on what they purchased and when they purchased it.

3. Align Ads With Landing Pages

You can have the most personalized ad in the world, but if a user clicks through to the accompanying landing page and isn’t met with the information they need, it’s all a waste.

Make sure ad landing pages continue the personalization efforts by calling out the shopper’s name; promoting the same, relevant products; or providing an incentive for them based on where they are in the customer journey.

4. Experiment With Different Targeting

Food brand Dashin shop wanted to reach more shoppers who were more likely to convert to improve the performance of their ad campaigns and drive more sales.

It created two custom audiences, each of which was based on specific actions customers had taken.

The first targeted people who had visited the brand’s Instagram Shop or profile in the past 30 days, and the other targeted website visitors. By A/B testing different ads for different audiences, the brand was able to learn more about what kind of personalization worked best.

5. Consider Your Call-to-Action (CTA)

Successful personalized ads personalize every part of the ad, including the CTA. It’s easy to use the standard “learn more” or “download now” fillers, but think about who it is you’re targeting and the specific action you want them to take next. For example, if you’re retargeting existing shoppers with a sweet incentive, try “claim your 10% off” or “grab your freebie” instead.

Provide a Personalized Experience

Despite data privacy concerns making it increasingly difficult to capture relevant customer information, shoppers are still keen to see personalized ads. Tapping into consumer behavior, past purchases, life stages, and other unique information to serve highly relevant ads can increase click-through rates (CTRs), boost sales, and create long-term loyal customers.