Audience targeting is essentially a filter applied to paid advertising efforts, usually on search engines or social networks, to target website users based on who they are and what they do / how they behave.
Examples of audiences are age, income, geography, and key page interaction and on social networks, these targeting methods can become even more specific. Examples: Net worth / income, loyalty credit card carrier (type / brand), brand following, key person following (celebrity, for example).
The most often application of audience targeting is using it as a layer to existing advertising. This type of targeting can be a cost-effective way to target broad keyword sets without wasting advertising budget on an unqualified demographic.
Example problem: A retail jewelry store focuses on high-income clients (average sale: $5,000+) and wants to target “engagement ring” traffic, but doesn’t want to advertising to the 80% of the engagement ring retail market that can’t afford a $5k+.
Example solution: Bid on the keywords related to engagement ring, but with a filter of income requirements in the top 20% of the market. Include geographical filters too as a best practice, and the campaign will more closely aligned to targeting the right customer type.