Abstract
Paid media expenditures could potentially increase earned media exposures such as social media posts and other word-of-mouth (WOM). However, academic research on the effect of advertising on WOM is scarce and shows mixed results. We examine the relationship between monthly Internet and TV advertising expenditures and WOM for 538 U.S. national brands across 16 categories over 6.5 years. We find that the average implied advertising elasticity on total WOM is small: 0.019 for TV, and 0.014 for Internet. On the online WOM (measured volume of brand chatter on blogs, user-forums, and Twitter), we find average monthly effects of 0.008 for TV and 0.01 for Internet advertising. Even the categories that have the strongest implied elasticities are only as large as 0.05. Despite this small average effect, we do find that advertising in certain events may produce more desirable amounts of WOM. Specifically, using a synthetic control approach, we find that being a Super Bowl advertiser causes a moderate increase in total WOM that lasts 1 month. The effect on online WOM is larger, but lasts for only 3 days. We discuss the implications of these findings for managing advertising and WOM.
Highlights
Paid advertising could potentially increase earned media exposures such as social media posts and word of mouth (WOM, hereafter)
Our results demonstrate that some campaigns for some brands such as Super Bowl advertisements generate far higher WOM response, but that the small average implied elasticity and low heterogeneity across brands and categories suggest that these larger effects are relatively rare and are not obtained without a focused investment of considerable resources
The main effect of being a Super Bowl advertiser for total WOM is positive, large (0.27) and significant (t-stat = 2.31). This indicates that Super Bowl advertising expenditures are not more efficient per dollar than at other times, Super Bowl advertisers have on average 27% higher total WOM in the month of the Super Bowl than in other periods. This large effect size could suggest that advertising is more effective in the Super Bowl for creating total WOM, but that the variation in advertising spending on Super Bowl ads is insufficient to attribute that gain to advertising expenditures
Summary
Paid advertising could potentially increase earned media exposures such as social media posts and word of mouth (WOM, hereafter). We conduct an analysis using the generalized synthetic control technique (Abadie et al 2010; Bai 2013; Xu 2017), which constructs a difference-in-difference type estimator by matching the treatment group to a control group synthesized from a weighted combination of the non-treated brands This causal inference technique aims to reduce the potential sources of bias in order to assess from non-experimental data the causal impact of a treatment (in this case, advertising on the Super Bowl) on the outcome (WOM). Our results demonstrate that some campaigns for some brands such as Super Bowl advertisements generate far higher WOM response, but that the small average implied elasticity and low heterogeneity across brands and categories suggest that these larger effects are relatively rare and are not obtained without a focused investment of considerable resources
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