November 19, 2010, 3:12 PM

Diapers.com finds new customers with retargeting

3% of consumers who see the retargeted ads click through to the retailer’s site.

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Eight months after it implemented a new retargeting technology, Diapers.com says it has found the right display ad formula that delivers consumers who convert into customers. 

The site makes use of retargeting, which is a way to serve relevant display ads to consumers based on their prior browsing behaviors. Consumers who visit Diapers.com but don’t complete a transaction see Diapers.com ads, some of which feature products they viewed on the site, elsewhere on the web.

“We like the notion of retargeting,” says Matt Lindenberg, associate director of marketing at Diapers.com. “You are taking folks who have demonstrated an interest in our store in advance and are trying to bring them further down the sales funnel and convert them.” Diapers.com is No. 85 on Internet Retailer’s Top 500 Guide. Last month, Amazon.com (No. 1) announced it was acquiring Quidsi Inc., Diapers.com’s parent company, for $500 million. 

Diapers.com implemented vendor TellApart’s retargeting technology in March. Lindenberg says the vendor charged no upfront cost. Instead, TellApart takes a commission of sales that come after the consumer clicks on a retargeted ad.

The payment structure is different than what Diapers.com encountered in 2008, when it first tried retargeting with another vendor, which the e-retailer declines to name.

Lindenberg says the firm charged for sales coming from ad clicks and for customers who saw the retargeted ad and later returned to Diapers.com and made purchases without specifically clicking on the ad, often called a view-through conversion. Paying for view-through conversions didn’t sit well with Diapers.com executives because they could not determine that the sale came specifically because the consumer saw the ad.

“By the very fact that these consumers had been to our site showed they already had the propensity to shop with us. Who knows whether it was the display ad or an ad in a magazine or a tip from a friend that made them come back and make a purchase,” Lindenberg says.

He says Diapers.com encouraged the previous vendor to run some tests to prove the connection. The vendor did not and the two firms ended the relationship, which had lasted about six months.

Lindenberg says Diapers.com recognized the value of retargeting, but didn’t want to move forward with a new vendor unless it could find one that met its business requirements. Lindenberg says that as the e-retailer talked with other retargeting vendors, it realized that some retargeting technology could slow site performance to an unacceptable level as it collected the browsing data it would use later to target the ad. Diapers.com also wanted proof that the customers converting through retargeted ads wouldn’t have converted otherwise.

Diapers.com put TellApart’s technology through extensive testing to prove these points prior to signing on, Lindenberg says. TellApart CEO Josh McFarland says his company’s technology only collects browsing information after a page loads to the customer, so the user experience remains unaffected. It also ran A/B tests to show the degree to which retargeted consumers converted versus consumers who saw a non-Diapers.com ads under the same conditions.

TellApart began serving retargeted Diapers.com ads to consumers in March. Since then, the vendor has delivered almost 10 million impressions a month. 3% of consumers who see the retargeted ads click through and 5% of those consumers convert. Diapers.com pays a commission only on those post-click conversions.

“Clicks are a transparent metric we can both agree on,” McFarland says. “We can match those numbers up and see those things very transparently.”

Lindenberg says 25% of these conversions are new customers and more than a third of these become repeat Diapers.com customers within 90 days. He says retargeting accounts for 3/10 of 1% of total sales.

McFarland says TellApart is constantly adjusting its retargeting technology to squeeze more results out of its efforts. He says the company’s hopes to make retargeting responsible for capturing 3% to 7% of new revenue for each of its clients. 

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