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Quantitative Marketing and Economics

, Volume 12, Issue 3, pp 235–266 | Cite as

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

  • Randall A. LewisEmail author
  • David H. Reiley
Article

Abstract

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.

Keywords

Online advertising Display advertising Advertising effectiveness Field experiment Difference in differences 

JEL Classification

Codes: C93 - Field Experiments M37 - Advertising D12 - Consumer Economics: Empirical Analysis 

Notes

Acknowledgments

We thank Meredith Gordon, Sergiy Matusevych, and especially Taylor Schreiner for their work on the experiment and data. Yahoo! Inc. provided financial and data assistance and guaranteed academic independence prior to our analysis so that the results could be published no matter how they turned out. We acknowledge the helpful comments of Manuela Angelucci, David Broockman, JP Dubé, Liran Einav, Glenn Ellison, Matt Gentzkow, Jerry Hausman, Kei Hirano, Garrett Johnson, Larry Katz, John List, Preston McAfee, Sendhil Mullainathan, Justin Rao, Paul Ruud, Michael Schwarz, Pai-Ling Yin, and many others, including attendees at many conferences and seminars.

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Copyright information

© Springer Science+Business Media New York 2014

Authors and Affiliations

  1. 1.Google, Inc.,Mountain ViewUSA

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