Two Is Better Than One? Synergies between Old and New Technologies, Exploring the Adoption of Targeting Technologies

This paper explores the benefits associated with the adoption of behavioral targeting (BT) and the advantages derived by its implementation with the paid search (PS) advertising. Using a unique and proprietary dataset on online investments across 20 industries we, first, examine the probability of investing in targeted advertising given existing investments in PS. Second, we estimate the potential synergies derived by the joint adoption of BT and PS. We find that firms already involved in PS advertising are less likely to invest in BT, we hypothesize that this result is driven by a lock-in effect due to the development of knowledge and skills in PS. This behavior is counterproductive; our results suggests there is a strong complementary relationship between BT and PS, thus suggesting that employing a multichannel strategy has significant benefits to overall firm performance.