Online Ads and Offline Sales:Measuring the Effects of Online 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 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.

Recipient of the 2015 Dick Wittink Prize award for the best paper published in Quantitative Marketing and Economics (with Randall Lewis).

 

First version: 21 August 2008

This version: 14 August 2013

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