Gauge the Trade-off Effects between Social Media and Traditional Platform in the Consumer Purchasing Funnel Ran (Alan) Zhang City University of Hong Kong Alan.Ran.Zhang@cityu.edu.hk Daniel Zantedeschi Ohio State University zantedeschi.1@osu.edu Shivendu Shivendu University of South Florida shivendu@usf.edu Abstract Targeted display advertising for individual consumers has become pervasive on social media platform and other online websites (traditional platform). Yet, the effectiveness of targeted advertising across online platforms is not well understood. Moreover, such advertising effect may be different for different types of consumers, i.e. consumers in the early stage and those in the late stage, relative to the final purchase stage. This paper aims at assessing the effectiveness of targeted advertising across online platforms on consumers' final conversion (purchase). In addition, we measure the complementarity and substitutability of online platforms for targeted advertising for upper funnel (early-stage) consumers and lower funnel (late- stage) consumers. We use machine learning techniques to form case-control designs analyzed employing regularized discrete choice models to select relevant features explaining the final conversion. The empirical analysis shows that (1) targeting across platforms is positively associated with the final conversion for the lower funnel consumers, but there is no measurable synergistic effect for the upper funnel consumers; (2) the main effect of targeting on social media is positively related to the final conversion for consumers in the upper funnel but has no significant impact for lower funnel consumers. We leverage upon these findings to discuss actionable managerial prescriptions. 1. Introduction The widespread adoption of the Internet and digital technologies has profoundly changed the advertising industry. Within digital advertising spending, display ad spending surpasses search ad spending in the US for the first time [8]. Advertisers invest heavily on display ads that run on various general sites (traditional platform) as well as social media. Social media is an increasingly popular platform and the ad spending on social media is expected to increase from 10.8 billion U.S. dollars in 2015 to 19.3 billion in 2018 [24]. Although advertisers spend a hefty amount of ad budget on social media websites, the effectiveness of display advertising, in particular, targeted advertising on social media is not yet clear to practitioners and academics. On one hand, people naturally connect on social media platform to stay up to date with their social life, e.g. interacting with their families and friends. Thus, they may have little interest in finding advertising useful [25]. On the other hand, social media can provide advertisers with detailed user profile information. The micro-level information becomes a great asset for advertisers allowing them to design and conduct more efficient targeting strategies by displaying customized ads to individual users, leading to potentially higher rates of ultimate conversions [9]. We attempt at answering whether and how targeted advertising on social media can be useful in converting consumers to purchase, relative to that on the traditional platform (Portal website, major media, lifestyle site, etc.). Answering this question will provide insights for academics and practitioners on the effectiveness of targeted ads and help practitioners make an informed decision on effectively allocating their ad budget on different online platforms. From the advertisers' perspective, it is important to understand whether and how the effects of targeted advertising on social media on consumers’ final conversion differ from that on the traditional media. Moreover, it is not clear whether consumers’ ad exposure on social media complements with or Proceedings of the 52nd Hawaii International Conference on System Sciences | 2019 URI: htps://hdl.handle.net/10125/59524 ISBN: 978-0-9981331-2-6 (CC BY-NC-ND 4.0) Page 842