What is Different About Online Advertising?

Avi Goldfarb
Review of Industrial Organization

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cites The Online Advertising Industry: Economics, Evolution, and Privacy on 6/3/2019, 1:46:22 PM

cites Standardization and the Effectiveness of Online Advertising on 6/3/2019, 1:46:22 PM

excerpt Display advertising offers a variety of opportunities to target advertising. In the 1990s, online display advertising was mainly targeted (and priced) based on user demographics, in a manner similar to television. Specifically, advertisers would place their ads on websites with the appropriate demographic audience: makeup ads on women.com and beer ads on espn.com. Over time, demographic targeting has become more sophisticated. Advertisers can target specific demographic groups (married women living in Iowa aged 60–64), based on information that users provide online. For example, if a user has provided detailed demographic information elsewhere (say to Google or Microsoft because of their email account), then that information might be used for targeting (for example in ads managed by Google or Microsoft, including many non-Google and non-Microsoft websites). on 6/3/2019, 1:47:40 PM

tag-as Targeted advertising on 6/3/2019, 1:48:29 PM

cites E-Customization on 6/3/2019, 1:54:07 PM

cites The Role of the Management Sciences in Research on Personalization on 6/3/2019, 1:58:30 PM

excerpt In contrast, the literature that measures online ad effectiveness is thriving. One important reason is that online advertising is relatively easy to measure. The direct two-way nature of Internet communication means that households that see ads are readily identified. Some responses, such as clickthroughs, are immediate and easily measured. In addition, by using a variety of tracking technologies, advertisers can see whether those same consumers actually buy a product. Furthermore, because each end user’s computer sends a specific request to the website’s server and the server responds to each with a separate data packet, experiments are relatively easy online. Most of the literature has combined experiments with some tracking technology to compare advertising views with outcomes. on 6/3/2019, 2:01:56 PM

excerpt The ability to show randomized ads to viewers at the individual level is a direct consequence of the reduced cost of targeting. Instead of running different ads in different cities or on different television programs, the Internet enables randomization at the end user level. Furthermore, the ability to observe which users view an ad and how they respond is also a consequence of the reduced cost of targeting through direct two-way communication between media source (server) and end user. on 6/3/2019, 2:02:14 PM

references Generalized second on 6/3/2019, 2:03:13 PM

excerpt The properties of these auctions (called generalized second-price auctions) were explored by Varian (2007) and Edelman et al. (2007). This literature has been extended to incorporate reserve prices (Edelman and Schwarz 2010), click weights (Liu and Chen 2006), and the incorporation of consumer choices into the model (Athey and Ellison 2009; Chen and He 2011). Agarwal et al. (2009) explore differences between auctions in which bidders pay per click (i.e., each time their ad is clicked by a user) or pay per action (i.e., each time a user buys something from their website). Katona and Sarvary (2010) explore the interaction between paid search results (the advertisements) and the algorithmic (organic) search results. Implicit in many of these models are heterogeneous bidders and the desire on the part of the search engines to price discriminate between advertisers—in other words, to target prices to advertisers. on 6/3/2019, 2:04:08 PM

excerpt the choice of mechanism is driven by the need for, and benefits of, price discrimination. on 6/3/2019, 2:06:14 PM

references The Market for Lemons on 6/3/2019, 2:09:27 PM

cites on 6/3/2019, 2:12:46 PM

cites Advertising standards and online advertising on 6/3/2019, 2:13:53 PM

cites Standardization and the Effectiveness of Online Advertising on 6/3/2019, 2:15:14 PM

cites Chapter 28 The Economic Analysis of Advertising on 6/3/2019, 2:16:03 PM