Targeting and Internet Advertising

36 Pages·2010·0.56 MB·English

Targeting and Internet
Advertising
Avi Goldfarb, University of Toronto
(Based on work with Catherine
Tucker, MIT-Sloan)
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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.
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Search Engine Advertising
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Online Display Advertising: Targeted
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Online Display Advertising: Obtrusive
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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
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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
–
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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
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Search Engine Advertising:
Pricing Ads to Context
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Setting: Personal Injury Law
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