Search vs. Site Retargeting : A Look through the Purchase Funnel

Retargeting is a popular digital advertising strategy that involves sending targeted messages to consumers who have either expressed an interest in a category or in a specific firm’s products. There are two major forms of retargeting: site-retargeting and search-retargeting. Site-retargeting is sending display ads to consumers who have visited the firm’s website but left without purchase. Search-retargeting is showing ads to consumers who have never visited the firm’s website but have recently searched for relevant keywords for the firm’s business at a search engine. Firms spend a greater share of the retargeting budget on site-retargeting, but search-retargeting is fast growing in the industry. Experts claim that search-retargeting is under-utilized and that firms are better off implementing both search-retargeting and site-retargeting together. We develop an analytical model to investigate what type of retargeting a firm should pursue. Specifically, we analyze when the firm is better off pursuing site-retargeting, search-retargeting, or both types of retargeting. Our model takes into consideration the firm’s competitive position and the degree of vertical differentiation between firms. Our analysis reveals the spillover effect of site-retargeting on search-retargeting and shows that retargeting decisions should not be reduced to a mere trade-off between site and search retargeting