How Are YouTube Ads Targeted?

Have you ever noticed that the ads you see on YouTube sometimes feature local businesses (Socket included)? Did you know that most of your YouTube ads are tailored specifically to you?
 
Ad space online is sold differently than it is for, say, television or newspaper space. In fact, many of those ad spaces are auctioned off per user, per view. You might not realize that, before you watch your 3 minute video clip, there’s an incredibly fast bidding war happening in the microseconds before the winning advertisement plays.
 
Here’s a quick breakdown of how that bidding system works:

Audience Targeting:

Say there’s a business that exclusively sells women’s cosmetics. Naturally, it benefits them to show their advertisement to women. Ads they show to men just aren’t very effective.
 
Now say there’s also a business that sells anti-aging cream. They’ve found that people over 55 love their product, but people under 55 aren’t interested at all. So ads they show to anyone younger than 55 are wasted.

Here’s where the bidding system jumps in. As thousands of users start watching videos, YouTube begins letting companies bid on the spaces. By setting presets ahead of time, each company lets YouTube know what they’re willing to pay per user – for instance, the cosmetic company will pay more for female users, and the anti-aging cream will pay more for users over 55.
 
Where those two profiles overlap – say, a 60 year old woman – the two companies will continue bidding until one of them hits their maximum payment cap.
 
Now imagine all of this, but instead of only two companies, there are hundreds of thousands simultaneously bidding. And all of this happens in the few seconds it takes for your video to load.

User Profiles:

So, how does YouTube know if someone is a 60 year old woman?

Well, they don’t. But they can guess. Based on what you search for and what you do, YouTube (and its parent company, Google) can usually estimate what gender and age you are, as well as your interests.
 
Of course, this is often less than perfect. Google doesn’t know whether you’re shopping for men’s shirts because you’re a man, or because it’s a Father’s Day gift. When multiple users share a computer, these profiles can become amusingly incorrect, too.
 
Wondering what information about you is being used for advertising auctions? Visit www.google.com/settings/ads/onweb to see who Google thinks you are, as well as to opt out of targeted ads.