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Search Engine Advertising: Channel Substitution when Pricing Ads to ContextAvi GoldfarbUniversity of Toronto - Rotman School of Management Catherine TuckerMassachusetts Institute of Technology (MIT) - Management Science (MS) October 1, 2010 NET Institute Working Paper No. 07-23 Abstract: We explore substitution patterns across advertising platforms. Using data on the advertising prices paid by lawyers for 139 Google search terms in 195 locations, we exploit a natural experiment in “ambulance-chaser” regulations across states. When lawyers cannot contact clients by mail, advertising prices per click for search engine advertisements are 5-7% higher. Therefore, online advertising substitutes for offline advertising. This substitution towards online advertising is strongest in markets with fewer customers, suggesting that the relationship between the online and offline media is mediated by the marketers’ need to target their communications.
Number of Pages in PDF File: 30 Keywords: search engines, advertising, market power, advertising prices JEL Classification: L86, M37 working papers seriesDate posted: October 15, 2007 ; Last revised: October 25, 2012Suggested CitationContact Information
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