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This is Part 8 of the series Money on Your Mind, a blog series created to tell you exactly what you need to know about your brain and your spending habits. We want to expand financial education and make you the best at saving money. This is why today we invite you to understand how online ads work and how they affect your spending:
How many times have you been looking online at those new, trendy shoes, only to see an ad for those exact shoes on your Instagram and Facebook that same day? Ads on social media and all across the internet are effective at targeting our brains to make us buy more than we usually would.
Why am I seeing targeted ads?
You’re not crazy if you think the internet knows more about you than your significant other. Companies like Google and Facebook collect profile data on you, which includes exactly what you’d expect - data that you’d use to set up your profile. This consists of information that can include categories such as age, gender, and location.
Retail sites often use third-party services to collect small bits of data, called cookies, on your online habits and activity. These cookies help track a variety of your behaviours like items you’ve searched, clicked on, purchased, and even added to your cart and ended up never purchasing.
All of this data is carried to other sites you visit and is used to show you personalized ads across the internet and even in your social media feeds. While the internet can’t read your mind just yet, it can analyze and potentially predict your behaviour.
Why targeted ads are so effective:
Being online is now just an essential part of everyday life. This year, the average person spends 2 hours and 24 minutes social media per day. Scrolling through social media, you are bound to find at least one sponsored ad every time you check it.
With online ads, you see constant reminders to the item you may have only briefly browsed. A common trick to see if you really want to purchase an item is to have a 24 hour cooling period. If you’ve forgotten about the decision or the item by this time, then you’d save money by not making the purchase. However, online ads make this 24 hour cooling period nearly impossible. With the item always in sight, it’s always on your mind. This goes hand in hand with the Recency Effect, a cognitive bias detailing that you remember the most recent information you were given the best.
Reminders can be a blessing when it comes to remembering your friend’s birthday or your anniversary, but they can also backfire when it comes to ads in a variety of ways. Your brain prioritizes itself and will become more stimulated to notice and trigger your memory when it sees products that you like, rather than random products from non-tailored ads. Especially if you’ve visited the product’s page before, you’ll likely pay more attention to the product. Your brain’s number one priority will always be you, so it makes sense that it will pay attention to ads that seem more relevant to you.
These targeted ads use the Mere Exposure Effect, also called the Familiarity Principle. People tend to be more comfortable with things or people that they’re familiar with. If you’ve ever been travelling and become homesick as you crave your grandmother’s special chocolate chip cookies, you know how this can feel. Consequently, this principle also explains that the more you’re exposed to an idea or product the more inclined you are to endorse or buy it.
The images the ads display only add to the stimulus your brain receives. By associating products with images, it becomes very easy to recall these items and pictures using them in your daily life. Instead of words, visual input provides your brain with a much faster response and association.
How to take action against targeted and personalised ads:
Being aware of how these ads can manipulate your purchasing habits can allow you to be cognizant with your online purchases. However, if you do find yourself falling into these traps often, there are a few steps you can take. Check your social media and browser settings to opt out of personalized ads. Turning off your cookies and downloading a free ad blocker can also limit the displayed ads. If you want heavy artillery, Adguard is one of the most effective weapons against ads.
Even though these ads are built to influence your brain’s decisions and work against your saving goals, you still have the power to be conscious of your purchases.
If you wanna learn more about the effect of social media can have on your spending habits we invite you to read our blog: How does social media make us more materialistic
Additionally, Cash Coach is a free app which is here to help you fight spending by training you to be the best at money-saving with your personalised ai coach! The more money you save, the higher you level up.