Do You See What I See? Ad Viewability and the Economics of Online Advertising

Abstract

Between 40% and 50% of online ads served by publishers are actually never seen by Internet users, resulting in ineffective branding campaigns and a considerable waste of money for advertisers. To address this issue, more and more advertisers use technologies to measure the viewability of advertising campaigns on publisher websites. This paper provides the first comprehensive economic analysis of the impact of the adoption of such technologies on the economics of online advertising. We construct a simple economic model of two-sided markets for advertising where publishers manage their website to attract Internet users and advertisers. We show that the adoption of an ad viewability measurement technology affects the level of ad viewability offered by publishers, the prices of ads and publisher profits, the demand of advertisers, and user experience. Analyzing the social welfare impact of ad viewability in a monopoly market, we show that the social welfare is greater with ad viewability when the quality of the editorial content is high enough to offset the drop in user experience (due to a higher ad viewability). In the case of a competition between publishers, when the quality of the editorial content is equivalent between publishers, the social welfare is greater with ad viewability when the competition is not too intense and the nuisance cost of ads is not too high.