TV Advertising and Online Sales: The Role of Inter-Temporal Substitution

Abstract

Firms use offline advertising to drive online browsing and sales. However, while a recent literature has demonstrated a surge in online activity in the minutes following TV advertising, there is limited evidence on the extent to which offline advertising indeed leads to a sustained significant uptake in online sales. We investigate the effect of TV advertising on browsing and sales accounting both for the instant effect as well as for an aggregate effect across a time window covering multiple weeks. Using evidence from a field test conducted by an online travel company, we confirm similar findings as in previous literature that TV advertising has a positive instant effect on both online browsing and online sales. However, this instant effect does not translate into an increase in either browsing or sales over a period of multiple weeks, implying that the firm does not see an increase in revenue as a result of the TV advertising campaign. We document consumers' inter-temporal substitution as the mechanism behind this aggregate null effect. The findings indicate that rather than focusing on instantaneous spikes marketing managers should consider a longer time window when evaluating the effectiveness of TV campaigns on online purchases.