The Impact of Targeting Technology on Advertising Markets and Media Competition

An important component of advertising effectiveness is the quality of the match between advertisers and the intended recipients of ads. Traditionally, media have been able to tighten such matches by providing content tailored for specific groups of consumers. For example, local media outlets attract audiences from their localities, ensuring that when local advertis ers place ads, they are mostly viewed by their potential customer base. Recently, online adver tising has afforded new technologies that tar get consumers directly rather than indirectly through tailored content. A leading example of such targeting is based on geographic loca tion (as inferred from IP addresses). So while the Boston Globe may have had an advantage in selling ads to Boston advertisers, now the New York Times can offer Boston-based ads to consumers located in Boston. Industry specula tion is that such technologies may spur higher demand for online advertising, but that these technologies will benefit general outlets more than local newspapers.1 It may be problematic for the future of the local news industry if gen eral outlets gain at their expense. To date there has been little analysis on how the market for advertising might be impacted by targeting.2 Intuition suggests that an outlet