This concept is pretty straightforward: some advertisers will want their ads to appear only to visitors accessing a website from a specific location. Most commonly, advertisers request that their ads be shown to U.S. visitors only.
This is generally an optimization technique; if an advertiser isn’t equipped to sell their products or services to consumers outside a specific country, there is no point in paying to show ads to visitors who aren’t able to become customers.
In other situations, advertisers may with to hyper-target visitors in specific locations. For example, the Southwest ad below was likely geo-targeted to serve to visitors in specific cities or ZIP codes:
This ad is promoting a very specific product (a flight from Chicago to Cancun) that will be relevant to only a very small portion of the population. As such, the advertiser has an interest in avoiding “wasted” impressions of this ad unit to web traffic that would have no interest in purchasing this flight (for example, people living in California).
It is up to publishers to implement geo-targeting restrictions on campaigns, though many advertisers are now able to monitor the locations of visitors to whom ads are served. Many ad serving platforms have relatively advanced geo-targeting capabilities now; below is an example of the interface used in DFP that can focus in on specific countries, states, and even cities:
Some generic geo-targeting requests, such as excluding non-U.S. traffic, generally won’t merit an increase in rates. However, “hypertargeting” requests such as the Southwest example above may warrant higher pricing. Typically, geo-targeting requests beyond the basic “U.S. only” warrant a premium of 10% to 50% above the rate card.