Are advertisers reading our minds?
Yesterday a few friends and I were discussing cruelty free makeup brands and I decided to look up some a few brands to see if they were cruelty free. This morning, as I do every morning, I checked my Instagram feed and saw several advertisements that I had never seen before for various makeup brands that were cruelty free. So how is this done?
Advertisements sold on Social Media Networks are priced so that advertisers “pay-per-click” and advertisers get assigned to different advertising spots based on their valuation and the price that each spot costs through a Generalized Second Price Auction. This is where a social media platform, such as Instagram, asks advertisers to announce their value per click, then they assign each advertiser to a slot so the the advertiser with the greatest value per click gets the slot with the most clicks and the final prices are determined so that each bidder is charged the next highest bid per click.
The slots that get the highest clicks are determined by location, but a slot will also have a higher click through rate is it’s audience has a pre-existing interest in the product or service being advertised. Social media platforms can collect data from its users, such as what products they have bought in the past, what online stores they have browsed or searched, what products the “like” or “follow” on social media in order to determine what they might be interested in and what advertisements would catch their attention. By targeting advertisements to certain groups with pre-existing interest the platforms which are offering these slots can ensure a higher click through rate, therefore making more money off of these advertisements.
http://www.economist.com/blogs/economist-explains/2014/09/economist-explains-12