Targeting and Internet Advertising PDF
Preview Targeting and Internet Advertising
Targeting and Internet Advertising Avi Goldfarb, University of Toronto (Based on work with Catherine Tucker, MIT-Sloan) 1 Internet advertising • Search engine advertising – $10 billion in 2009 – Typically sold by “cost-per-click” (“CPC”) – Usually sold via an auction • The CPC auction mechanism was originally developed by Goto.com/Overture but was refined substantially by Google, Yahoo, Microsoft, and others – Most ads are posted on the main search engines – Format is fairly standard text-only • Display advertising – $8 billion in 2009 – Typically sold by “cost-per-thousand” (“CPM”), though hybrid CPC/CPM pricing is increasingly common – Sold through auction and through sales forces – Ads are posted on a variety of online media, large and small – Format varies from small to large, text to multimedia, etc. 2 Search Engine Advertising 3 Online Display Advertising: Targeted 4 Online Display Advertising: Obtrusive 5 The Economics of Internet Advertising • A large and growing literature • Much of it has focused on auction design (Athey & Ellison; Varian; Edelman, Ostrovsky, & Schwarz, etc.) • There are several other interesting issues that are beginning to see some attention: – Pricing in two sided markets – Competition between online and offline media – Privacy – Targeting 6 Two papers (co-authored with Catherine Tucker) “Search Engine Advertising: Pricing Ads to Context” • Examines the prices of search engine ads – Focuses on targeting and substitution between online and – offline ad media “Online Display Advertising: Targeting & Obtrusiveness” • Examines when display advertising works – Focuses on targeted ads and obtrusive ads – 7 Themes 1. Targeting is a core benefit of online advertising 2. For search engine advertising, targeting is relatively easy because potential customers reveal what they are looking for – The value of the advertising goes up as the ads become more targeted 3. For display advertising, targeting can be more challenging. – The effectiveness of the advertising generally rises with targeting – But there is an exception—targeting becomes ineffective (or worse) when ads are obtrusive 8 Search Engine Advertising: Pricing Ads to Context 9 Setting: Personal Injury Law 10
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