Academic Research: The Power of Paid Aggregation for Brands

Multiple forms of content aggregated together can be enhanced through paid advertising. 

A study by Stanford School of Business marketing professors Navdeep S. Sahni and Harikesh S. Nair, proves this out through the results of a large scale field experiment on a restaurant review application. 

While much of their learnings can extend to both organic and paid content, there is perhaps more value to be found on the paid side. Sahni and Nair used a randomized sample of more than 200,000 consumers divided into two groups, those exposed to ads, and those not exposed to ads. They ended up finding that advertising in-of-itself increases consumers’ evaluations of local restaurants. Noting that, “Ads serve as implicit signals that enhance the appeal of the advertised restaurants to consumers.” In other words, the restaurants that advertised more, got better reviews and more business. While one might expect that, we ignore the inner workings of this cycle at our own peril. What’s even more interesting is that Sahni and Nair also randomized the ad-exposure group, with one group seeing the ad content tagged as “sponsored,” what they call the “disclosure” group. In the other group, consumers were simply shown the ad content without a tag. What did they find? Disclosing ad content increased calls to the restaurant by 77%! This statistic caused Sahni and Nair to conclude that “the act of advertising itself conveys information about quality.”

It really is another virtuous cycle of sorts, which brands can seize for their network, as Sahni and Nair conclude:

“Both consumers and advertisers seem to benefit from the signalling. Consumers shift choices towards restaurants that are better rated (at baseline) in the disclosure group compared to the non-disclosure group, and advertisers gain from the improved outcomes induced by disclosure.”

This suggests that paid advertising creates a positive feedback loop. They find that restaurants that advertise more, have higher ratings because of the implicit signaling of the advertising content (as they say in study, “the act of advertising itself conveys information about quality.”). Consumers flock to higher rated restaurants. The fact that restaurants are higher rated because they advertise (compared to the baseline non-ad group) is the key point. 

Whether it’s a network of local restaurants, or a set of chain stores, paid activation is an important pillar in the brand network.

Learn more about how collaborative advertising™ aggregates multiple forms of content to the benefit of the brand, channel partner, and consumer. Read The Indirect Majority – Why the Future of Social Advertising is Collaborative. 

Academic Research: The Power of Paid Aggregation for Brands

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