is your next miracle weight-loss berry? Analysis of the Effects of Fake News Ads Making Deceptive Claims on Consumers //

Journal of Marketing Research Scholarly insights were produced in partnership to the AMA Doctoral Student SIG – a network of Marketing PhD students around the globe.

Advertising is more than just information. Advertising penetrates the mind of the public with beliefs and desires.

William Burnbach

How many times have “verified” news articles informed you of a new weight loss or colon cleanser? Professor Anita Rao discusses fake news advertising and how it affects attracting customers to the advertised products in a recent Journal of Marketing Research article. There are many ways a potential consumer can learn about a product. One way is through advertisements that claim fake news to be legitimate. The Federal Trade Commission (FTC), which recognized that fake news can be used to deceive consumers into buying inferior products, ordered the nationwide shut down of more than 35 fake websites operated by 10 parent companies.

Using this event as a setting, the author uses a difference-in-difference approach to quantify the effects of the FTC shutdown and understand how it impacted merchant site visits via other advertising channels. This study is thought-provoking. The author uses consumer complaint data to augment original purchase numbers to find a significant drop in merchant site visits following the FTC shutdown. The surprising fact is that not all traffic to affected merchant sites was affected. Some experienced positive substitution effects from legitimate and organic advertisements.

What are the key takeaways? These inferences are important for policymakers and managers. These results suggest that policymakers need to be vigilant for fraud sites and merchant websites that sell inferior products and fake news. Managers should ensure that their promotions do not incite or encourage consumers to buy products that aren’t up to the mark. This will help to maintain consumer loyalty and goodwill.

We were able to reach the author to find out more about their study, and to gain further insights.

Q: What motivated you to write this paper. How did you approach the literature review (deceptive advertising in marketing or fake news in politics)? Why did you choose “fake advertising” as the focal concept?

A: I was fascinated by the fact, in the political realm, it is difficult to uncover the treatment effect on fake news. Those who consume fake information might be a small group of people. The outcomes (e.g. votes) in the absence and presence of fake news might have been similar. How can one determine if fake news had an impact? It is difficult to attribute the fake news exposure’s effect to the treatment without observing the behavior of people before and after the fake news was introduced. Second, I was able to find the FTC’s 2011 actions that closed down 10 fake news-operating companies. Combining this with the fact that marketing is able to access rich individual-level data and repeat observations, I was able to disentangle the treatment effect. Do fake news stories affect consumers’ purchasing propensities or are they only viewed by those consumers who are already on the market for these products? This question can be answered with the data we have in marketing.

Deeper research revealed that fake news marketing (adverts designed to look like editorial content), isn’t a new concept. It has existed since the invention of newspapers. The term fake news advertising is therefore more appropriate. The review team also suggested that the term fake news advertising be used to make it more specific and distinguish it from more general “fake information.”

Q: How did you go about identifying alternative/confounding events (e.g., negative publicity from the press, Google algorithms)? Is there a way you approach this problem in a systematic manner?

A: Yes. A causality study is a method that allows you to eliminate all other possible causes. You should consider all possible causes of similar patterns, and then try to eliminate them. It is a good idea to present to different audiences as possible: You get to hear alternate explanations, some that you may have already considered and some that are completely new. If you are able to convince your audience or provide additional data/analysis to answer the question, then you’re on the right track.

Q: Your empirical determination of the lag period as two months was amazing. How did you achieve this empirical verification? Was it difficult to convince reviewers to agree with it?

A: Thank You. It was indeed a fascinating and convincing find. It was actually comforting to see that the data was reliable. Complaints take time to report and it was comforting to see that this information in the data. The review team liked the idea, and they were open to using the analysis.

Q: How did you create two innovative approaches to this problem?

A: It was a question of whether these companies created fake news sites in an arbitrary manner after being shut down by the FTC. How can one tell if there are new fake news websites popping up? My setting shows that fake news sites have unique names. They mimic news sites by using words such as “daily,” news, and “report.” Since they must create multiple fake news websites, they often combine these words together with a number (report6, new9, etc.). These two patterns were crucial in identifying fake news sites being created.

Q: Given that the results speak of negative spillovers but positive substitute effects, what implications does this research have for marketers and managers?

A: It seems that fake news advertising works. The message is targeted more at policymakers than consumers. These messages can easily be persuasive for consumers, as is evident by the large treatment effect. Although there are still some new users who visit the site via regular ads, the attraction isn’t as strong as fake news ads which can bring in more visitors. This highlights the importance of regulatory oversight in domains that are susceptible to false advertising.

You can read the entire article here:

Anita Rao (2022), ” False Claims Using Fake News Advertising : The Impact on Consumers,” Journal of Marketing Research 59 (3), 534-54. doi:10.1177/00222437211039804

Is Acai the Next Miracle Weight-Loss berry? American Marketing Association: Analyzing the Effect of Fake News Ads Made on Consumers