Online ads and offline sales: measuring the effect of retail advertising via a controlled experiment on Yahoo

A randomized experiment with 1.6 million customers measures positive causal effects of online advertising for a major retailer. The advertising profitably increases purchases by 5%. 93% of the increase occurs in brick-and-mortar stores; 78% of the increase derives from consumers who never click the...

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Bibliographic Details
Published in:Quantitative marketing and economics 2014-09, Vol.12 (3), p.235-266
Main Authors: Lewis, Randall A., Reiley, David H.
Format: Article
Language:English
Subjects:
Brand image
Business and Management
Censuses
Consumer behavior
Consumers
Econometrics
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Experiments
Finance
GDP
Gross Domestic Product
Insurance
Management
Marketing
Online advertising
Purchasing
Retail stores
Statistical significance
Statistics for Business
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Summary:A randomized experiment with 1.6 million customers measures positive causal effects of online advertising for a major retailer. The advertising profitably increases purchases by 5%. 93% of the increase occurs in brick-and-mortar stores; 78% of the increase derives from consumers who never click the ads. Our large sample reaches the statistical frontier for measuring economically relevant effects. We improve econometric efficiency by supplementing our experimental variation with non-experimental variation caused by consumer browsing behavior. Our experiment provides a specification check for observational difference-in-differences and cross-sectional estimators; the latter exhibits a large negative bias three times the estimated experimental effect.
ISSN:1570-7156
1573-711X
DOI:10.1007/s11129-014-9146-6