Are Viewer and Advertiser Preferences Aligned? Evidence from Israel

Consumers usually dislike ads, yet firms continue to spend heavily on them. We use two years of high-frequency data on prime-time TV advertising in Israel to study how this distaste — measured by the fraction of viewers who switch to another channel — varies by demographic group and by the sector of the advertising firm. We also estimate the value advertisers place on impressions and how this varies by viewer demographics and firm sector. Our main finding is a negative relationship between viewer and advertiser valuations across sectors: advertisements from sectors that value viewers more are generally less liked by those viewers than ads from other sectors. In a counterfactual simulation, we show that sector-specific advertising prices would likely benefit viewers, as they would reduce the number of ads from less-liked sectors. Sector-specific prices would also benefit TV stations by generating higher advertising revenues than uniform pricing.