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

Listed author(s):
  • Randall Lewis

    ()

  • David Reiley

    ()

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. Copyright Springer Science+Business Media New York 2014

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File URL: http://hdl.handle.net/10.1007/s11129-014-9146-6
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Article provided by Springer in its journal Quantitative Marketing and Economics.

Volume (Year): 12 (2014)
Issue (Month): 3 (September)
Pages: 235-266

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Handle: RePEc:kap:qmktec:v:12:y:2014:i:3:p:235-266
DOI: 10.1007/s11129-014-9146-6
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/business+%26+management/marketing/journal/11129/PS2

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  1. Stefano DellaVigna & Matthew Gentzkow, 2010. "Persuasion: Empirical Evidence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 643-669, September.
  2. Randall Lewis & David Reiley, 2014. "Advertising Effectively Influences Older Users: How Field Experiments Can Improve Measurement and Targeting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 147-159, March.
  3. repec:feb:artefa:0087 is not listed on IDEAS
  4. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
  5. Daniel A. Ackerberg, 2003. "Advertising, learning, and consumer choice in experience good markets: an empirical examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1007-1040, August.
  6. Thomas Blake & Chris Nosko & Steven Tadelis, 2015. "Consumer Heterogeneity and Paid Search Effectiveness: A Large‐Scale Field Experiment," Econometrica, Econometric Society, vol. 83, pages 155-174, January.
  7. Duncan Simester & Yu (Jeffrey) Hu & Erik Brynjolfsson & Eric T. Anderson, 2009. "Dynamics Of Retail Advertising: Evidence From A Field Experiment," Economic Inquiry, Western Economic Association International, vol. 47(3), pages 482-499, July.
  8. Joseph O. Eastlack, Jr. & Ambar G. Rao, 1989. "Advertising Experiments at the Campbell Soup Company," Marketing Science, INFORMS, vol. 8(1), pages 57-71.
  9. Ackerberg, Daniel A, 2001. "Empirically Distinguishing Informative and Prestige Effects of Advertising," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 316-333, Summer.
  10. Anindya Ghose & Sha Yang, 2009. "An Empirical Analysis of Search Engine Advertising: Sponsored Search in Electronic Markets," Management Science, INFORMS, vol. 55(10), pages 1605-1622, October.
  11. Leonard M. Lodish & Magid M. Abraham & Jeanne Livelsberger & Beth Lubetkin & Bruce Richardson & Mary Ellen Stevens, 1995. "A Summary of Fifty-Five In-Market Experimental Estimates of the Long-Term Effect of TV Advertising," Marketing Science, INFORMS, vol. 14(3_supplem), pages 133-140.
  12. Anindya Ghose & Sha Yang, 2007. "An Empirical Analysis of Search Engine Advertising: Sponsored Search and Cross-Selling in Electronic Markets," Working Papers 07-35, NET Institute, revised Sep 2007.
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