Advertising Bans and the Substitutability of Online and Offline Advertising

Abstract

We examine whether the growth of the internet has reduced the effectiveness of government regulation of advertising. Specifically, we combine variation in state and local regulation of offline alcohol advertising with data from field tests that randomized exposure to online advertising for 275 different online advertising campaigns to 61,580 individuals. People are 8 percent less likely to say that they will purchase an alcoholic beverage in states that have alcohol advertising bans compared to states that do not. For consumers exposed to online advertising, this gap narrows to 3 percent. We also show similar effects for four changes in local offline alcohol advertising restrictions where we observe advertising effectiveness both before and after the change. Our results suggest that online advertising could reduce the effectiveness of attempts to regulate other advertising channels because online advertising substitutes for (rather than complements) offline advertising. Our results also suggest an informative role for online advertising in places with bans: The effect of online advertising is disproportionately high for new products and for products with low awareness in places that have bans.

Targeted Advertising in Magazine Markets and the Advent of the Internet

“…16 The distribution of advertising rates per reader is heavily skewed so we employ its natural logarithm as our dependent variable.…”

“…Zentner (2011) shows that advertising budgets in traditional media have decreased in countries with higher rates of Internet use. In addition, two recent papers by Tucker (2011c and2011d) conclude that the Internet is a substitute to offline advertising, although they do not specifically examine targeted advertising. Their results suggest that online advertising for certain goods is either more effective or higher priced in those jurisdictions where offline advertising is not permitted; thereby indicating that offline and online channels for these goods are substitutes.…”

“…This is an especially important finding because most recent theoretical work models them as being substitutes, because of the assumption that multiple advertising messages are redundant. Second, the existing empirical studies of possible online complementarities examine the demand for online advertising when the offline option is either unavailable or restricted to advertisers Tucker, 2011c and2011d). By contrast, we examine the question of advertising complementarity for all goods, with no specific focus on those that face advertising bans.…”

“…In fact, we require an 16 Koschat and Putsis (2002) use the price for a full color advertisement instead of weighted prices. We use weighted advertising rates because the average share of full color ads across time and magazines is 88 percent in our data, and lower in the earlier years.…”

The Substitution Effect of Mobile Games on Console Games: An Empirical Analysis of the Japanese Video Game Industry

“…They used data from the books sold on Amazon, which were the top sellers in 1497 local bookstores in America. Goldfarb et al [4] analyzed the substitution between the online and offline advertising markets. The authors showed that online advertising substitutes the offline advertising, but the opposite was not true.…”