Audience Targeting vs. Observation Strategy: How (+ When) to Use Each

Audience targeting lets you show ads to a custom audience with a smaller ad spend, while no audience targeting (Observation setting) boosts your reach and data analysis for a higher price.

Imagine you have an upcoming call with a potential new client. Between all the tasks on your to-do list, you rushed through reviewing the client’s initial lead form. Think you’d nail the call? Maybe not.

The same goes for a Google Ads campaign if you don’t study your audience. 

The pay-per-click (PPC) platform gives you ample opportunity to customize audience targeting. However, you can gather valuable audience intel first with the Observation setting, or “no audience targeting.”

Rachel Corak, HawkSEM associate director, boasts years of experience with audience data and PPC campaigns. She helps us break down audience targeting vs. no audience targeting and how to maximize each in your campaigns.

When to use audience targeting

Everyone has their favorite dinner spots. Say yours is an Italian restaurant you visit every other Saturday. After years of dining there, you don’t need Google Maps to guide you there.

Audience targeting works similarly: you know your audience well and can toggle targeting settings to better reach them.

So what are some of the ideal situations to use audience targeting?

1. You want to convert more qualified leads

Audience targeting shows relevant ads to people most likely to buy your products, especially with remarketing.

If a person has visited your website three times in the last week or so, audience targeting lets you speak directly to them and seal the deal. It’s a great option for brands that want to boost sales, revenue, and return on investment (ROI).

2. You have a limited budget

Inflation has hit everyone’s pockets, from grocery bills and housing costs to business supplies, contractors, and marketing budgets.

With a tighter ad spend, audience targeting helps you focus funds on efforts you know will work. Your money goes toward your most qualified audience, avoiding unnecessary costs on a broader reach that may not deliver engagement or conversions.

3. You know your target market

Apart from remarketing audiences, you might already recognize common traits across your best customers.

Perhaps your customer relationship management (CRM) system reveals that your biggest spenders are moms over 40 who fall into the Cooking Enthusiast affinity audience.

In that case, why try to fix what isn’t broken? Audience targeting helps you capitalize on data you’ve already gathered from previous ad campaigns or internal customer data.

Still, Corak reminds us to revisit your target audience settings every so often:

“Sometimes, audiences that are set to targeting won’t actually be the best audiences to achieve the highest amount of conversions or best quality conversion,” she explains. “Because of this, it is worth occasionally reassessing target audiences and always being open to trying new tactics.”

Take our client NurseRegistry.com. We refreshed their targeting criteria to better align with their client personas.

As a result, we nailed their conversion rate optimization (CRO) goal and increased conversions by 32%. Plus, we doubled qualified clients while reducing the cost to acquire them by 46%! Go fish.

When to use the Observation setting

Audience targeting zeroes in on specific, high-potential customers. The Observation setting, on the other hand, reaches a broader customer base without precise targeting.

You should use Observation setting when:

1. You want to better understand your target audience

Are you a new business? You might have an idea of who your audience is, but you won’t know for sure until you study them. Corak sees this as the best use case for the Observation setting.

Although it’s costlier because of its broad reach, new businesses can think of it as a temporary investment to boost future sales. This gives them abundant audience data to see who best interacts with their ads. With these insights, you can narrow down targeting for better results.

When can you switch to more specific audience targeting? It depends, says Corak:

“The amount of time needed is circumstantial, really,” she says. “It would have unique considerations based on things like the industry and budget.”

That said, Corak still recommends the Observation setting even if brands already know their target audience. Here’s why:

2. You want to uncover new audiences

Say you’re an ecommerce brand that sells home improvement tools. Traditionally, your target audience has been middle-aged men with a high household income.

Can you say for certain that this is the only audience segment interested in your products? Perhaps another segment is eager to try your products but isn’t seeing your ads because of your limited targeting.

Maybe women from LA in their 20s aren’t your typical customers, but the Observation setting can confirm if that’s indeed the case. You can compare impressions and clicks across different audience segments, and low and behold, you could discover increased interest from this unexpected audience.

Your fishing pond just got bigger.

Corak says this is an excellent way to scale your account and unveil new growth opportunities.

3. You want to collect more data

Here’s the thing: business trends are fluid. We see new PPC trends every year, like voice search, machine learning, and customer demand for more personalization.

However, it’s not just the PPC world that evolves — your industry does, too. That’s why the same tried-and-true tactics can lose their effectiveness if you don’t revisit them every so often.

The Observation setting helps you collect ongoing data about your customers, so you can improve your marketing strategies over time. These insights could reveal new pain points and preferences to inform new ad formats, keywords, or channels.

Corak sees opportunities to improve marketing tactics with the Observation setting:

“If we see audiences that interact well but don’t convert, this could lead to growth opportunities with CRO-focused initiatives, like building new landing pages with unique messaging catered to these audiences,” she says.

Audience targeting vs. no audience targeting: key differences

Digital marketing campaigns can benefit from both audience targeting and the Observation setting. That said, there are some key differences between the two:

• Reach: Audience targeting has a smaller ad reach with specific audiences, while Observation setting has a wider reach with multiple audiences.
• Cost: Audience targeting is cheaper because it targets a smaller group of people, while the Observation setting costs more to account for greater ad reach.
• Data: Audience targeting only gives you data on the audience you target, while the Observation setting gives you a comparative analysis of how your ads perform across multiple audiences.

3 best practices for audience targeting

PPC campaigns involve many moving parts, and it’s not always easy to direct efforts toward ROI. Follow these HawkSEM-approved best practices to make the most of audience targeting:

1. Always A/B test audience targeting criteria

You might A/B test various ad elements like titles, keywords, and landing page visuals. You can also compare ad performance across different targeting parameters.

Corak says she always conducts A/B testing for audience targeting:

“These audience segments, whether set to targeting or Observation, are available within the data insights in the ad account, so this is a great way to compare and analyze their performance,” she shares.

“You can also use Experiments within the ad account to test different audience targeting and analyze results that way as well.”

For example, you could run a campaign that targets the demographic markers “female,” “Age 35-44,” and “Top 10% of household income.”

Then compare the results against a campaign that targets the same demographic criteria but puts “male” in the gender choice instead. Run these campaigns side-by-side for at least two weeks, and note which performs best to inform your marketing strategy.

Our advice? Look at metrics like clickthrough rate (CTR), conversion rate, and return on ad spend (ROAS) to assess results.

2. Try the Observation setting even if you know your target audience

Even if you have enough ad spend to play with, we always recommend the Observation setting for more audience insights. Over time, you can learn more about how different audience segments respond to your ads and content, which offers valuable insights.

Data insights lead to more efficiencies and, ideally, more ROI. That’s why Corak says that more data is never a bad thing:

“There is really no harm to having audiences set to observe, as it only serves to capture new data insights,” she explains.

3. Inform your strategy with data from other channels, not just Google Ads

Observation-mode campaigns give you loads of data across different audience subsets; nonetheless, that only speaks to audiences that browse the search engine.

What about audience activity on Facebook, Instagram, or even other search engines like Bing? You might capture new audiences on these platforms, but you’ll need to access their data to find them.

While each of these PPC networks has built-in data management platforms, you can’t view all the data from every channel in one place.

The fix? ConversionIQ, our unique performance management system that gives every client access to real-time insights and revenue attribution to every aspect of their campaigns, including insights from different channels, time periods, and assets.

What is audience targeting?

Audience targeting is a PPC marketing strategy that shows your ads to specific groups or audience segments (a subgroup within a larger audience).

For example, you might direct ads to market audiences who have already interacted with your web page, or who live in a specific location. If anyone who browses the search engine results page (SERP) doesn’t fall into your chosen segment, they won’t see your ad.

Since audience targeting significantly narrows your ads’ reach, your ad spend will be a lot cheaper than the broader-reach Observation setting (more on that shortly).

Types of audience targeting that Google Ads offers

Affinity audiences

Affinity audiences represent people with particular interests in products or niches similar to your brand. Google determines affinity audiences based on their website history.

Say a person regularly scrolls through Vogue’s website, follows models on Instagram, and purchases tons of high fashion online, they might fall into the Lifestyle and Hobbies → Fashionistas affinity audience. If you’re a luxury ecommerce store, this audience would be an ideal target.

Here are a few more examples of affinity audiences you could target:

• Banking and Finance → Avid Investors
• Lifestyle and Hobbies → Thrillseekers
• Home and Garden → Do It Yourselfers (DIYers)
• Media and Entertainment → Gamers
• News and politics → Avid News Readers

Pro tip: Leverage Facebook Ads’ lookalike audiences to capture more potential customers who share attributes with your existing customers. 

Remarketing

Remarketing shows your ads to audiences who have already interacted with your brand. In other words, it places your ads in front of people who are primed for conversions. Previous interactions might look like a previous visit to your website, app, or social media platforms.

Got an online store? You’ll love Google’s dynamic remarketing audience, which allows for retargeting ads to audiences who have viewed a specific product on your online store.

This targeting option boosts conversions, as it captures audiences further down the buyer’s journey, right when they’re ready to make a purchase.

Demographics

Demographic targeting on Google Ads includes age, gender, parental status, and household income. Google predicts and assesses this information from online behaviors, account settings, and social media activity.

There are some categories of demographic data Google Ads doesn’t allow you to target, such as race, ethnicity, marital status, or psychographics.

Instead, you could target these demographic groups:

• Age:
  • 18-24
  • 25-34
  • 35-44
  • 45-54
  • 55-64
  • 65+
  • Unknown
• Gender:
  • Female
  • Male
  • Unknown
• Household income:
  • Top 10%
  • 11-20%
  • 21-30%
  • 31-40%
  • 41-50%
  • Lower 50%
  • Unknown
• Parental status:
  • Parent
  • Not a parent
  • Unknown

Keep in mind that “Unknown” will always provide broad ad reach because the pool of people Google can’t identify is significantly larger.

Audience targeting is like fishing with a line and rod; you won’t hook a bunch of fish at once, but if you’re patient you’ll catch the right audience at just the right time.

What is the Observation setting (no audience targeting)?

The Observation setting shows your ads to anyone who types your keywords into Google. They don’t need to belong to a certain demographic and likely haven’t visited your site in the past. In other words, you cast your net over the entire crowd of browsers.

Plus, Google lets you monitor performance across various audiences during your campaign. For example, your ad appears to various affinity audiences, and you can see which ones engage the most through clicks.

From there, you can tweak your campaign to focus on the most qualified audiences.

Where to access targeting and the Observation setting in Google Ads

Once you set up a Google campaign, you can select your audience targeting settings under “Audience segments.”

You’ll see an option up top where you can select “Audience targeting” or “Observation setting.”

If you select “audience targeting,” you can browse through a long list of segments and decide whether to apply them to just one campaign, or to an ad group.

The takeaway

Audience targeting is a tedious marketing task that requires constant attention to detail and data. However, with a smart targeting strategy, brands can direct ads to those most interested and likely to buy their products.

And if you don’t have time for all the research, campaign tweaking, and strategy? No sweat.

A Google Premier Partner PPC agency like HawkSEM has your back.

Backed with real-time data and insights from our proprietary tech and decades of industry experience, our PPC strategists monitor and optimize your campaigns for peak performance.

Ready to unlock more audiences and conversions? We’re just a call away.