Research Insight | Ad Retargeting is Overrated
For years, digital advertisers have treated retargeting as the gold standard of online advertising. The logic seems obvious: If someone already visited your website, ads reminding them to return should generate more sales than ads shown to new audiences. This belief is so strong that when Apple’s iOS 14 limited cross-app tracking, many marketers feared retargeting—and their performance—would collapse.
But a Journal of Interactive Marketing study suggests the industry may be overestimating the value of retargeting.
Researchers partnered with a major bed-in-a-box mattress company and tested over $5.7 million in ad spend across Google and Facebook. They compared two strategies: retargeting past website visitors and prospecting new audiences. Contrary to industry beliefs and platform-reported metrics, the experiment revealed that prospecting ads consistently outperformed retargeting ads.
The researchers propose that platform attribution systems systematically overstate retargeting effectiveness through a measurement-induced bias. Consider a typical customer journey: After clicking a prospecting ad, a consumer might take two weeks to decide on a mattress purchase. During this time, they see dozens of retargeting ads and likely click on one before buying. The platform then credits that final retargeting click with causing the sale—even though the consumer was already planning to purchase. The retargeting ads receive credit for sales they didn’t actually generate.
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What You Need to Know
- Question platform attribution reports, especially for long purchase-cycle products.
- Implement aggressive frequency caps on retargeting to reduce wasted spend.
- Consider reallocating budget toward prospecting campaigns that reach new audiences with novel product information.
Abstract
Retargeting, the practice of showing ads to previous website visitors, has been a core value proposition for many digital advertising platforms. However, recent privacy restrictions (e.g., Apple’s iOS 14, the General Data Protection Regulation) have significantly reduced its efficacy, leading many advertisers to cut digital ad spending. Despite the widespread belief that retargeting is essential for online advertising efficacy, empirical evidence of its impact on incremental sales remains limited. This article presents the results of a large-scale field experiment conducted on the Google and Facebook ad networks for a major player in the bed-in-box category. Contrary to prevalent industry assumptions, the experiment reveals large and consistent returns to prospecting ads across both ad networks, while retargeting ads yield significantly lower returns. These findings challenge the perceived necessity of retargeting in digital advertising strategies and provide new insights into the role of prospecting ads in influencing consumer decisions for durable goods.
Jeffrey S. Larson and Jeffrey P. Dotson, “Prospecting vs. Retargeting: Insights from a Geography-Based Field Experiment,” Journal of Interactive Marketing. doi:10.1177/10949968261422740