The Economic Analysis of Advertising

In this section, Bagwell does discuss several implications of the new media and advertising in short detail however the majority of this article is related to conveying theoretical grounds for advertising and providing some fundamental aspects of advertising in relation to economics. Theories described cover pricing strategies, monopolies, product differentiation and quality. This essay serves as a great start for learning about the economy and advertising.

 Bagwell, K. (2007). Chapter 28 the economic analysis of advertising. In M. Armstrong and R. Porter (Ed.), Handbook of industrial organization, (pp. 1701-1844)Elsevier.

Google and other search engines changing the focus of advertising

In Google’s mission statement one of their objectives entails “providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page.” It goes further to mention that by doing so it makes advertising useful for the consumer as well as the advertiser. By providing psycholographical information and allowing companies to allocate their ads directly to the consumer, do search engines conserve economic costs that would have been wasted on the uninterested consumer?

Related resources:

 Google’s Mission Statement. Retrieved from http://www.google.com/intl/en/corporate/index.html on March 31, 2008.

Van Couvering, E. (2004). New media? The political economy of Internet search engines. Paper presented at the Annual Conference of the International Association of Media & Communications Researchers, Porto Alegre, Brazil.

A List of Books Concerning New Media Business and Economy…

                                                   

1. Begdikian, Ben H.The new media monopoly. Boston: Beacon Press, 2004.

2. Jones, Steven G. (Ed.) Cybersociety 2.0: revisiting computer-mediated communication and community. Thousand Oals, California: Sage Publications, 1998.

3. Kelly, K. New rules for the new economy. Fourth Estate: London, 1998.

4. Perrons, D. Gender segregation: divisions of work in post-industrial welfare states. Burlington, VT : Ashgate , 2006.

5. Turow, Joseph. Breaking up America: advertisers and the new media world. Chicago : University of Chicago Press, 1997.

Evaluating the potential of interactive media through a new lens: Search versus experience goods. – Lisa Klein

Klein uses a consumer behavior theory presented by Nelson (1970,1974,1976,1981) as a theoretical basis for analyzing the potential of the new media, namely the Internet, as a source for altering the approach marketers take to consumers as well as how consumers engage in the decision making process. Nelson’s theory distinguishes three types of goods, search goods, experience goods, and credence goods, in the perception of the consumer. A search good is defined when “full information for dominant product attributes, such as the goods intrinsic values, can be known prior to the purchase.” This type of good involves the least amount of work for the consumer. An experience good can be defined when “full information about the product cannot be known without direct experience (such as sampling) and information search for ‘dominant attributes’ is more costly/difficult than direct product experience.” Klein cites another study that recognizes these three goods are valued most useful by the consumer (search goods > experience goods > credence goods). According to Klein, the internet essentially translates experience goods into search goods, providing “experience without product ownership.” Klein also states that the competition may be driven by pre-purchase incentives from producers and economical focus of producers may be allocated to more communicative research and development.

Klein, L. R. (1998). Evaluating the potential of interactive media through a new lens: Search versus experience goods. Journal of Business Research, 41(3), 195-203.

Interactive Advertising from Chevrolet

 Chevrolet used a video contest asking contestants to create a commercial for their new Chevy Tahoe. This interactive form of advertising was an attempt to gain publicity as well as an incentive to become interested in the Chevy Tahoe. Some ads went well, but in some cases, the plan had negative effects.

Companies on MySpace–different opinions, questions

Should companies be on MySpace?   Social Networking Weblog

Companies that are using MySpace well   ADpunch blog

Companies discover MySpace marketing Galveston County Daily News

As Customers Flock to the Web, Intel Gives Chase With Its Ad Budget

New York Times Article, October 10 2007.

 Quote: “The Intel Corporation has decided that its partners in the “Intel inside” cooperative advertising program … ought to accelerate their shift of ad dollars to newer media like the Internet from older media like television and print.So, effective in 2008, Intel will require companies that take part in the co-op program to spend a minimum of 35 percent of the money that Intel provides them on online marketing”

BRIGHT LIGHTS, BIG IMPACT: WHY DIGITAL BILLBOARDS ARE GROWING IN POPULARITY

Journal article found on ProQuest by Sarah Goldstein, published in March 2008. Digital Signs.

The New Advertising Outlet: Your Life

New York Times Article published on October 12 2007. Idea of the human billboard.

 Quote: “But many large marketers are taking huge chunks of money out of their budgets for traditional media and using the funds to develop new, more direct interactions with consumers — not only on the Internet, but also through in-person events.”

Advertising on Facebook

Facebook’s explanation of how it’s social advertising program works. They stress: Advanced Targeting, Content Integration, Flexible Pricing, Trusted Referrals