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Online display advertising relies on a complex network of intermediaries between advertisers and publishers. Often, advertisers do not know the context in which their ads appear. Yet, recent evidences suggest the media environment generates externality on the advertising message. We investigate how increased control over the advertising context affects advertising costs and effectiveness. Rémi Devaux, PhD student at CERNA (Centre for Industrial Economics) at Mines ParisTech, investigates at the CERNA seminar on 5 May 2022 how increased control over the advertising context affects advertising cots and effectiveness.
Online display advertising relies on a complex network of intermediaries between advertisers and publishers. Often, advertisers do not know the context in which their ads appear. Yet, recent evidence suggests the media environment generates externalities on the advertising message.
Remi Devaux investigates how increased control over the advertising context affects advertising costs and effectiveness. Two mechanisms are investigated: (i) the ability for advertisers to match ads with page contents (contextual advertising) and (ii) private marketplaces (PMPs) whereby publishers sell premium ads to a group of selected advertisers.
Leveraging a database of +110.000 display ads run by notorious advertisers from the hotel and perfume industries, we identify two results.
First, matching ads with website contents yields better returns and is cheaper than individual targeting based on users’ personal data.
Second, PMPs generate two countervailing effects. On the one hand they crowd-out quality ads from the open market. On the other hand, they foster the presence of quality advertisers on the site which may generate positive externalities for the other ads. Because publishers do not provide information about the existence of a PMP to all advertisers, PMPs can lead to adverse selection issues.
Next seminar at Cerna, May 18th
Rémi Devaux joined CERNA as a PhD student in October 2019. He is supervised by Professor Olivier Bomsel. His thesis focuses on cost-benefit analysis of targeted advertising and is part of a CIFRE partnership with the data science company Ekimetrics. Rémi graduated from Paris-Dauphine University in Network Industries and Digital Economy. He is the co-author of the book: "Le nouveau western- qui peut réfréner les nouveaux géants du web ?" with Olivier Bomsel