Digital devices will play an even bigger role in shopping experiences by 2026.

Display retargeting has been described as “the sledgehammer of the web,” hitting shoppers over and over with ads for a product they looked at once. While some consumers may be annoyed, online retailers continue retargeting as an advertising tactic because it works.

Studies have shown these ads, which are individually targeted and fully automated by software, elicit more consumer interest than ads that are untargeted or based on user demographics. Such retargeting ads even subtly shift consumers’ thinking, making them believe they are more sophisticated or greener than they previously believed, depending on the message.

But just because retargeting ads work doesn’t mean they couldn’t work better. Many retail marketers who hand off their retargeting campaigns to third-party providers are unaware of how these companies generate revenue, and most of them are taking a very generous cut of a brand’s ad spend. These providers essentially operate inside a black box, leaving retailers in the dark on their own data and metrics.

Retargeting’s transparency problem

It’s no secret that the digital advertising landscape has been marred by fraud. A bombshell ANA report in 2016 outlined “pervasive” instances of kickbacks from media companies to ad agencies. Procter & Gamble chief brand officer Marc Pritchard — the industry’s chief critic of digital advertising — has called on advertisers to pull their money out of digital media if the industry doesn’t start offering more transparency.

Though a few have done just that, most haven’t. Brands are still willing to tolerate a lack of transparency and the arbitraging of media as the cost of doing business because the results from retargeting still look pretty good. But the extent of waste going on behind the scenes is dramatic. For instance, the Guardian found that up to 70 percent of programmatic spending can go to middlemen in the programmatic supply chain. Furthermore, independent audits of ad tech companies have found that in some cases, up to 50 percent of web sites targeted by those companies are of suspect quality.

Retailers may be partly to blame for the problem, as many don’t fully understand programmatic media. Case in point: Can you explain the full process of programmatic advertising without the help of an agency? Or are you able to provide detailed metrics and data from your most recent retargeting campaign? If both answers are yes, you are an anomaly.

Meanwhile, existing providers take advantage of this lack of technical understanding. This is one reason why transparency isn’t built into programmatic advertising. A recent study by the ANA and other ad industry organizations found that a lack of transparency makes it hard for advertisers to manage, measure and audit programmatic media investments “with the same rigor as traditional media investment,” according to ANA chief executive officer, Bob Liodice.

The other downside of using black box providers to run retargeting campaigns is that brands end up depriving themselves of valuable insights into who their audience is and how to reach them. If your ads work but you don’t know why, you will have no insight into what might be causing dry or boom periods. Perhaps more alarmingly, by handing off retargeting you are also outsourcing what should be a core competency of your business.

The answer: Take retargeting in-house

The combination of a lack of transparency, high media mark-up and the growing importance of data analytics are prompting brands to handle programmatic advertising — including retargeting — themselves using in-house marketing teams.

With more programmatic advertising handled in-house, marketing teams will have the data in front of them to help answer the question “What will happen if…” Direct access to data will allow teams to quickly troubleshoot poor ROI or build on a successful retargeting campaign.

Retailers can also wring more efficiency from their spending by running randomized control trials of their retargeting campaigns and then compare the actions of a group exposed to advertising to a group that hasn’t seen any ads. Why spend money advertising to someone who would have made the same purchase whether or not they saw your retargeting ad?

This focus on incremental advertising performance — the “gold standard” of performance metrics — will tell you if your retargeting campaign really worked, or if you wasted money retargeting consumers who were already predisposed to purchase. Controlling campaigns in-house enables this kind of analysis, whereas using a black box provider would keep these insights locked away.

When you control your data and ad spend and have the right method for testing ad effectiveness, online shoppers will take notice — receiving relevant digital ads that pique their interest in a purchase. Your business will also take notice of the ROI.

Suddenly, retargeting isn’t a sledgehammer; it’s a scalpel.

Claude Denton is Nanigans’ cofounder and chief technology officer. Prior to Nanigans, he was cofounder and CTO of CourseAdvisor. Claude holds 16 patents and four applications in communications and video processing architecture. Claude has BS and MS degrees in electrical engineering and computer science from MIT.

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