Information Asymmetry in Online Advertising

Jan W. Wiktor, Katarzyna Sanak-Kosmowska

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000454055
• Edition: 1
• Topic: Business
• Subtopic: Advertising
• Index: Business

Advertising is a company's major form of communication with the market; it is a component of the IMC system, having a special impact on the addressee, and is a form of persuasive communication affecting consumer behaviour. Advertising may reflect information asymmetry between an advertiser and recipients. This book presents an assessment of the forms and range of consumer behaviour manipulation through information asymmetry in online advertising and explores the possible causes, forms, and effects. The work offers a new approach to the role of advertising in the digital world, especially its forms and impact strategies.

The theoretical framework presented is based on issues related to online advertising, information asymmetry, and social manipulation. The book describes the ways in which these areas can be explored, and it presents the results of empirical studies. Empirical research allows for identifying companies' moral hazard strategies and their consequences – e-consumers' adverse selection. The research provides an empirical answer to the question: to what extent is advertising a transparent form of communication, and to what extent does it represent the world of manipulation?

Based on an interdisciplinary theoretical approach, empirical studies conducted by the authors, and theoretical and managerial implication, the book encourages its readers to find their own answers. Given the interdisciplinary nature of this work, it will be of interest to scholars and researchers within the fields of marketing, media and communication, economics, psychology, sociology, and ethics.

Part I

Theoretical framework

Online advertising, information asymmetry, manipulation

DOI: 10.4324/9781003134121-1

The first part of the monograph establishes the theoretical framework of the research problem, which is composed of three thematic fields. The first concerns the characteristics, functions, and tools of online advertising in hypermedia computer-mediated environments. These issues are examined in the context of the determinants and consequences – for firms and consumers – of the digital transformation process, which raises the question of whether online advertising expresses the symmetry or asymmetry of the interests of both parties in the communication process.

Beginning with an exposition of information asymmetry in economic theory, the second field engages with the reasons for, and consequences of, information asymmetry in online advertising. The analysis is centred on the phenomenon of information asymmetry in online advertising, while the perspective of the marketing communication process provides the main narrative thrust.

Manipulation in online advertising, which is a primary outcome of information asymmetry, makes up the third thematic field. The identifiers and forms of manipulation are described, and the mechanism by which it influences e-consumers is shown. One of the most astute exemplifications of the problem is the ‘world of manipulation and deception’ described by George Akerlof and Robert Shiller in Phishing for Phools. Reflections on the ethical aspects of manipulation in advertising conclude the section.

The description of the theoretical framework ends in a natural and logical fashion with the research objectives and hypotheses. These formed the basis for constructing the research model, selecting the research samples, and organizing the study.

1 Online advertising

Characteristics, functions, and forms of advertising in a digital world

DOI: 10.4324/9781003134121-2

Introduction

Advertising as a constituent of integrated marketing communication (IMC)

Advertising in a digital world in the context of the digital transformation

The marketing communication model in virtual space

Features of online advertising

Functions of advertising in the virtual environment

Informational function

Persuasive function

Competitive function

Tools of online advertising

Advertising creation strategies: between information and persuasion

The selection of creative strategies

Unique advertising value

Functions and types of advertising slogans

Formulas and creative styles in advertising

The meaning of advertising for firms and for consumers: symmetry or asymmetry of interests?

References

Introduction

This chapter presents the distinguishing features of advertising in a digital world. The discussion begins with an analysis of the role of advertising in integrated marketing communication, which is placed within the context of the digital transformation of marketing, the creation of a digital world, and within the paradigm of the revolution in information and communication technologies and the development of the network society. These issues are central to the book’s aims and to our account of the changes in the system of marketing communication. In this connection we present a model of virtual communication (many-to-many communication) and describe the features and functions of advertising in a hypermedia computer-mediated environment. Particular attention is paid to the classification and characteristics of the tools of online advertising. An important issue tackled in the chapter is the creative strategies employed in online advertising, which are forms of expression of the informational, persuasive, and competitive functions of advertising. We focus attention on the three elements that provide the rationale and framework for firms’ decisions: unique advertising value, the typology and properties of slogans, and formulas and creative styles in advertising. The chapter concludes by asking whether advertising expresses symmetry or asymmetry of interests with respect to firms and e-consumers.

Advertising as a constituent of integrated marketing communication (IMC)

Advertising is a basic form of mass communication in marketing. According to the definition given by the American Marketing Association (AMA) in its dictionary, advertising is,

any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

(Alexsander,1965; Bennett, 1988)

The definition the AMA now offers is broader,

Advertising is the placement of announcements and messages in time or space by business firms, nonprofit organizations, government agencies, and individuals who seek to inform and/or persuade members of a particular target market or audience regarding their products, services, organizations or ideas.

(AMA Dictionary, 2020)

The definitions from the literature refer directly or indirectly to these definitions. Russell and Lane (1993, p. 26) write, for example, that,

Advertising is a message paid for by an identified sponsor and delivered through some medium of mass communication. Advertising is persuasive communication. It is not neutral; it is not unbiased; it says, ‘I am going to sell you a product or an idea.’

Manfred Bruhn identifies advertising (Mediawerbung) with media communication and defines it as a paid means for advertisers to disseminate particular kinds of promotional information via media. Its purpose is to accomplish the established goals of marketing communication.

Advertising is any paid form of non-personal presentation and promotion of ideas, goods, and services by an identified advertiser.

(Bruhn, 2013, p. 375)

Philip Kotler and Kevin Keller (2012, p. 512), in turn, define advertising as,

any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor via print media (newspapers and magazines), broadcast media (radio and television), network media (telephone, cable, satellite, wireless), electronic media (audiotape, videotape, videodisk, CD-ROM, Web page), and display media (billboards, signs, posters).

Stressing that it is rare to find a formal definition of the term, Eagle, Dahl, Czarnecka, and Lloyd (2014, p. 245) provide their own definition of advertising,

Advertising may be defined as any form of communication that serves to achieve one or more of the following: to inform, to advise, to persuade, to remind and to provide information to aid the process of informed decision-making on the part of the consumer or customer.

This brief review of definitions prompts a commentary on two elements of the definiens of the word advertising: the subject of the advertising and the advertiser (see, for example, Kotler, 1994; Winer, 2000; Rossiter & Bellman, 2005; Belch & Belch, 2007; Shimp & Andrews, 2011; Percy, 2014; Maráková, 2016; Romat & Senderov, 2018; Keer & Richards, 2020). The first observation is that definitions of advertising tend to emphasize the promotion of a product (a good, an idea, a service) and to exclude the firm as a subject of advertising. Meanwhile, corporate advertising (of firms, of trademarks) occupies an important place in marketing alongside brand advertising. The second observation concerns the use of the term sponsor to denote an advertiser. This term has another connotation and is not a designatum of the concept of advertising. The term sponsor (from Latin) is correct only for that specific form of promotion and communication with the market known as sponsoring. It should be replaced by the term advertiser, which covers the broad range of people and institutions that are interested in advertising and finance it. We understand advertising to mean a non-personal, paid-for form of conveying market information that promotes an advertiser’s sales offer to a mass audience (AMA Dictionary, 2020). It is a definition that contains the four basic features of advertising: non-personal form of communication, mass audience, paid-for message, and – understood in broad terms – the sales offer. It can refer to the advertising of trademarks and of actual products (individual brands, private brands) in the form of goods, services, places, and ideas. We place particular emphasis on the special nature of the information advertising contains. It is more than a persuasive message that trumpets the virtues of the brand concerned and sets out the conditions of purchase. Advertising conveys information but it also shapes that information. It is a message that seeks to exert a particular influence on addressees’ behaviour and the way they make purchasing decisions. It has become part of the business environment, of social life, and of the public space.

The issue of persuasive messages and influencing consumer behaviour is important to the aims of this volume. It is important when assessing the approach taken by firms to framing their advertising and to the consumer’s perception of information asymmetry in the message and of having their behaviour manipulated. These issues are the focus of the book’s deliberations – its theoretical framework and empirical research.

Advertising is part of the spectrum of IMC, which Schultz and Schultz (1998, pp. 9–26) define as

a strategic business process used to plan, develop, execute, and evaluate a series of coordinated, measurable, persuasive brand communication programs over a period of time with consumers, customers, prospects, as well as other targeted and relevant or internal audiences.

Integrated marketing communication applies an array of tools with various functions and characteristics in what is known as the promotion mix (see, among others, Kliatchko, 2005 and Juska, 2017).

The internal structure of this communication system has not, however, been clearly identified or defined. Definitions of IMC in the literature, which tend to present a certain number of interconnected elements (tools, instruments) serving to perform the functions of communication, lack a single, overarching criterion of classification. It can be seen both in practice and in the marketing literature that different meanings are assigned to the idea of communication and that they are associated with different sets of tools with different, fairly arbitrary characteristics.

The number of components in scholars’ IMC systems ranges from three (Thomas, 1995) to six (Juska, 2017), eight (Kotler & Keller, 2012), and even nine (Bruhn, 2013). In a review of 11 books on marketing communication (Meffert, 1986; Bennett, 1988; Kotler, 1994; Thomas, 1995; Nieschlag, Dicht, & Hörschgen,1998; Kotler & Keller, 2012; Bruhn, 2013; de Pelsmacker, Guens, & Van den Berg, 2013; Eagle, Dahl, Czarnecka, & Lloyd, 2014; Smith & Zook, 2016; Juska, 2017), a combined total of 23 categories appear in the structure of IMC: advertising (including media advertising, promotion, promotion of sales, public relations, public relations and publicity, personal sales, sales personnel, personal communication, direct marketing, sponsoring, event and experience marketing, interactive marketing, word-of-mouth marketing, fairs and exhibitions, social media communication, event marketing, brand visibility, packaging, digital platforms, content marketing, e-communication, and ‘own media’ in the form of websites and social media. This plethora of categories and the range of ideas associated with them makes IMC, whose internal structure lacks cohesion and is fairly randomly defined, something of a conceptual conglomerate (see, among others, Kliatchko, 2005; Rossiter & Bellman, 2005; Caalin, 2008; Shimp & Andrews, 2011; Rodgers & Thorson, 2012; Wiktor, 2013; Batra & Keller, 2016; Juska, 2017). Though absorbing, discussion of IMC is beyond the scope of this volume. Taking into account the nature of the impact and attributes of a given category, the addressee profiles, and the level of differentiation in the information directed at individual market segments, we assume that:

• the four categories of advertising, sales promotion, personal promotion and public relations make up the structure of IMC, and
• these categories are exploited in two distinct environments: the traditional marketing communication environment and the hypermedia computer environment; the nature and form of their use is different in each (Figure 1.1).

Figure 1.1 The morphology of integrated marketing communication (IMC)

Each of these four categories can be used in both communication environments: traditional and digital. At the same time, it is plain that the IMC categories have distinct specificities and characteristics in the offline and online environments. They are clearly linked by their features and functions. All of the categories of the communication system should be applied in combination. Taken together, they then determine the nature of the IMC system. It should not be forgotten here that we are referring to a part of a greater whole: the ma...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• Introduction
• PART I Theoretical framework: Online advertising, information asymmetry, manipulation
• PART II Research results: Information asymmetry and the world of manipulation in online advertising
• PART III Managerial and theoretical implications
• Summary
• Index