Randomized experiments are widely viewed as the gold standard for measuring advertising incrementality, yet advertisers run them far less often than theory would predict. This MSI working paper develops a game-theoretic model of online advertising to explain why. By explicitly modeling the fixed and opportunity costs of experimentation—and the strategic role of ad platforms in setting reserve prices—the study shows how platforms may rationally discourage experimentation even when learning ad effectiveness could improve allocation efficiency. The findings offer a new economic explanation for persistently low experimentation rates in digital advertising markets.
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Yes, context does matter in how advertising communicates, according to neuroscience studies conducted as part of the ARF’s “How Advertising Works” project. In examining the impact of humorous, fear-inducing, and sentimental programs, the studies yielded surprising and valuable findings such as this: sentimental ads may benefit from context alignment, boosting both memory and ad liking.
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Creating Effective Mobile Advertising
Manuel Garcia-Garcia, Ph.D., SVP, The ARF
Mobile ad spend is at $43 billion and growing rapidly, but an estimated 62% of campaigns today are not using mobile in an optimal way. For example, creative executions customized or developed for mobile are far more effective than those repurposed from TV. We surveyed and interviewed creative experts from top agencies and the provided the following guidelines:
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The Advertising Research Foundation (ARF) announced the findings from its How Advertising Works research, based on over 5000 campaigns, 12 years of data, and $375B in advertising spend in 41 countries across over 100 categories.
This study, independently conducted by the ARF, was sponsored and supported by over 25 contributing companies including ESPN, MediaScience, Neuro-Insight, Analytic Partners, Unilever, Kellogg, Levi Strauss, Nissan, Starcom Mediavest, CBS, Facebook, Google, Marketing Evolution, Millward Brown, iHeartMedia, Meredith, Nielsen, and comScore. There has not been a study done to this scale and depth in over 25 years.
Groundbreaking insights are highlighted:
- Marketers may be starving off growth by not investing enough in advertising as they shift the mix from traditional to new platforms, missing the opportunity to generate billions in additional return.
- Spending across multiple platforms delivers greater ROI than any single platform – including for Millennial consumers.
- “Silo-investing” – too much frequency via a single platform can lead to diminishing returns.
- To jumpstart growth marketers can take advantage of the “kicker effect” of smart spending with specific combinations of traditional plus new media on the right platforms.
- A unified creative strategy across platforms is key to compound the investment of a multi-platform campaign, but unified creative executions also need to be specifically tailored to each platform to ensure optimal consumer engagement.
Gayle Fuguitt, CEO and President of the ARF said, “We are pleased to lead this important initiative that brings scientific proof, measured opportunities and a roadmap for growth to the industry at C-suite speed and scale.”
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