Advertising Bans and the Substitutability of Online and Offline Advertising

Abstract

The authors examine whether the growth of the Internet has reduced the effectiveness of government regulation of advertising. They combine nonexperimental variation in local regulation of offline alcohol advertising with data from field tests that randomized exposure to online advertising for 275 different online advertising campaigns to 61,580 people. The results show that people are 8% less likely to say that they will purchase an alcoholic beverage in states that have alcohol advertising bans compared with states that do not. For consumers exposed to online advertising, this gap narrows to 3%. There are similar effects for four changes in local offline alcohol advertising restrictions when advertising effectiveness is observed both before and after the change. The effect of online advertising is disproportionately high for new products and for products with low awareness in places that have bans. This suggests that online advertising could reduce the effectiveness of attempts to regulate offline advertising channels because online advertising substitutes for (rather than complements) offline advertising.