Lecture 7: Advertising

Traditional advertising, such as TV, radio, billboard, print ads, usually use impression as a unit to measure price and value. Impression is the frequency of advertising showing up. Traditional commercial media charge sponsors based on cost per thousand impression or mille (CPM). Super bowl is an extreme case that cost per impression is very high. All these traditional advertising focus on the frequency of ads appearance rather then the effectiveness of the commercial. Sponsors can spend a great deal of money but do not obtain expected return, since the budget spent on advertising is not positively related to income, placing a huge risk for a firm when spending millions dollars to advertise via traditional media.