Online Ads and Offline Sales:
Measuring the Effects 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 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.

Winner of the 2015 Dick Wittink Prize for the best paper published in Quantitative Marketing and Economics.

This paper previously circulated under the title "Does Retail Advertising Work?"

First version: 21 August 2008

This version: 27 February 2014

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