We use data from video files of all advertisements in the OTC analgesics industry from 2001 to 2005 to measure the information content in ads. We propose a simple theoretical framework to motivate an ordered probit model of information content. We find that stronger vertical differentiation is positively associated with the delivery of more product information in a brand's advertisements: brands with higher levels of quality include more information cues. Comparative advertisements contain significantly more product information than noncomparative advertisements. Brands with higher market shares and brands competing against generic substitutes with higher market shares have less information content. Our empirical analysis examines the relationship between market variables and the information content of advertising. First, we classify and fully measure different types of advertising content, as well as the distribution of information cues, within an entire industry.
KeywordsSecond, we use an ordered probit model of the number of information cues in advertisements as a function of the market share of a brand, its core vertical characteristics, and the share of the generic substitute. To motivate the selection of an ordered probit we develop a simple and intuitive framework in which firms decide how much objective information to include in an advertisement.The underlying idea behind our empirical analysis is that there exists a trade-off between objective information and other persuasion, subject to random factors intrinsic to specific ads. The amount of time spent on information-as approximated by the number of information cues-has systematic and random components.We find that stronger vertical differentiation is positively associated with more information.We also find that comparative advertisements contain significantly more information than noncomparative advertisements, and that larger brands and a higher market share of the generic version of a brand are both associated with less informative ads. Significant estimation bias results from not controlling for the endogeneity of the decision to use comparative advertising and from the endogeneity of market share.Our analysis contributes to the sparse empirical literature on the persuasive vs. informative content of advertising (see Bagwell, 2007, for a comprehensive survey). To our knowledge, the only