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.

Keywords: Advertising, Regulation, Advertising Media Mix, Internet