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Search Engine Advertising: Channel Substitution when Pricing Ads to Context

Author(s)
Goldfarb, Avi; Tucker, Catherine Elizabeth
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Creative Commons Attribution-Noncommercial-Share Alike 3.0 http://creativecommons.org/licenses/by-nc-sa/3.0/
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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 toward 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.
Date issued
2011-01
URI
http://hdl.handle.net/1721.1/65335
Department
Sloan School of Management
Journal
Management Science
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Citation
Goldfarb, A., and C. Tucker. “Search Engine Advertising: Channel Substitution When Pricing Ads to Context.” Management Science 57.3 (2011) : 458-470. ©2011 INFORMS
Version: Author's final manuscript
ISSN
1526-5501
0025-1909

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