Prospecting Versus Retargeting: Insights from a Geography-Based Field Experiment

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., those in Apple's iOS 14 and 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-a-box category. Contrary to prevalent industry assumptions, the experiment reveals large and consistent returns on 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.