American Economic Review, Vol. 100, No. 2, pp. 608-613, May 2010
This paper presents a formal analysis of advertising when the internet allows targeting of advertisements.
Ad targeting by general online media will likely expand the market share of general media at the expense of local media.
Ads are typically more effective when they are viewed by the audience they target.
Before internet advertising, local media outlets served as a conduit for advertisements tailored to a particular geographical population.
Today online advertising outlets can use IP addresses to target a geographic location through any online medium, perhaps to the detriment of local media.
Targeting allows online advertising outlets that are not geographically constrained in their reach to increase profits when advertising space is limited, and online outlets may be able to charge different rates for ads targeting different localities.
Despite this, online advertising outlets may be rather slow in adopting targeting technologies.
The organization of outlets may also change through structural changes in advertising and shifts in consumer habits, each brought about through developments in other technologies.