Advertising Bans and the Substitutability of Online and Offline Advertising

45 Pages Posted: 5 May 2010  

Avi Goldfarb

University of Toronto - Rotman School of Management

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS)

Date Written: May 4, 2010

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.

Keywords: Advertising, Regulation, Advertising Media Mix, Internet

Suggested Citation

Goldfarb, Avi and Tucker, Catherine E., Advertising Bans and the Substitutability of Online and Offline Advertising (May 4, 2010). Available at SSRN: https://ssrn.com/abstract=1600221 or http://dx.doi.org/10.2139/ssrn.1600221

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

Catherine E. Tucker (Contact Author)

Massachusetts Institute of Technology (MIT) - Management Science (MS) ( email )

100 Main St
E62-536
Cambridge, MA 02142
United States

HOME PAGE: http://cetucker.scripts.mit.edu

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