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Measuring the Effects of Advertising: The Digital Frontier

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  • Randall Lewis
  • Justin M. Rao
  • David H. Reiley

Abstract

Online advertising offers unprecedented opportunities for measurement. A host of new metrics, clicks being the leading example, have become widespread in advertising science. New data and experimentation platforms open the door for firms and researchers to measure true causal effects of advertising on a variety of consumer behaviors, such as purchases. We dissect the new metrics and methods currently used by industry researchers, attacking the question, "How hard is it to reliably measure advertising effectiveness?" We outline the questions that we think can be answered by current data and methods, those that we believe will be in play within five years, and those that we believe could not be answered with arbitrarily large and detailed data. We pay close attention to the advances in computational advertising that are not only increasing the impact of advertising, but also usefully shifting the focus from "who to hit" to "what do I get."

Suggested Citation

  • Randall Lewis & Justin M. Rao & David H. Reiley, 2013. "Measuring the Effects of Advertising: The Digital Frontier," NBER Working Papers 19520, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19520
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    Cited by:

    1. Robert W. Fairlie & Samantha H. Grunberg, 2014. "Access To Technology And The Transfer Function Of Community Colleges: Evidence From A Field Experiment," Economic Inquiry, Western Economic Association International, vol. 52(3), pages 1040-1059, July.
    2. Luis Aguiar & Joel Waldfogel, 2018. "Platforms, Promotion, and Product Discovery: Evidence from Spotify Playlists," JRC Working Papers on Digital Economy 2018-04, Joint Research Centre.
    3. L. Elisa Celis & Gregory Lewis & Markus Mobius & Hamid Nazerzadeh, 2014. "Buy-It-Now or Take-a-Chance: Price Discrimination Through Randomized Auctions," Management Science, INFORMS, vol. 60(12), pages 2927-2948, December.
    4. Hana Choi & Carl F. Mela & Santiago R. Balseiro & Adam Leary, 2020. "Online Display Advertising Markets: A Literature Review and Future Directions," Information Systems Research, INFORMS, vol. 31(2), pages 556-575, June.
    5. Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 12(1), pages 65-90.
    6. Brett R Gordon & Kinshuk Jerath & Zsolt Katona & Sridhar Narayanan & Jiwoong Shin & Kenneth C Wilbur, 2019. "Inefficiencies in Digital Advertising Markets," Papers 1912.09012, arXiv.org, revised Feb 2020.
    7. J. Levin & L. Einav, 2012. "Empirical Industrial Organization: A Progress Report," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 1.
    8. Roktim Sarmah & Ayesha Khatun & Aayushi Singh, 2023. "Perception and Awareness of Youth Toward the Social Advertising Campaigns Being Run by Private Brands," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 14(1), pages 1-20, January.
    9. Avi Goldfarb & Catherine E. Tucker, 2015. "Standardization and the Effectiveness of Online Advertising," Management Science, INFORMS, vol. 61(11), pages 2707-2719, November.
    10. Bergès, Fabian & Monier-Dilhan, Sylvette, 2012. "Mass Retailers’ Advertising Strategies Faced with Different Competitor Store Formats: Commodity Stores or Hard Discounts," TSE Working Papers 12-277, Toulouse School of Economics (TSE).
    11. Susan Athey & Emilio Calvano & Joshua Gans, 2013. "The Impact of the Internet on Advertising Markets for News Media," NBER Working Papers 19419, National Bureau of Economic Research, Inc.
    12. Susan Athey & Emilio Calvano & Joshua S. Gans, 2014. "The Impact of Consumer Multi-homing on Advertising Markets and Media Competition," CSEF Working Papers 379, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 27 Apr 2016.
    13. Ajay Agrawal & John Horton & Nicola Lacetera & Elizabeth Lyons, 2015. "Digitization and the Contract Labor Market: A Research Agenda," NBER Chapters, in: Economic Analysis of the Digital Economy, pages 219-250, National Bureau of Economic Research, Inc.
    14. Adena, Maja & Hager, Anselm, 2020. "Does online fundraising increase charitable giving? A nation-wide field experiment on Facebook," Discussion Papers, Research Unit: Economics of Change SP II 2020-302, WZB Berlin Social Science Center.
    15. Lint Barrage & Eric Chyn & Justine Hastings, 2020. "Advertising and Environmental Stewardship: Evidence from the BP Oil Spill," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 33-61, February.
    16. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    17. Luis Aguiar & Joel Waldfogel, 2021. "Platforms, Power, and Promotion: Evidence from Spotify Playlists," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 653-691, September.
    18. Fabian Bergès & Sylvette Monier-Dilhan, 2013. "Mass Retailers' Advertising Strategies Against Commodity Stores," Economics Bulletin, AccessEcon, vol. 33(4), pages 2968-2981.
    19. Krishen, Anjala S. & Dwivedi, Yogesh K. & Bindu, N. & Kumar, K. Satheesh, 2021. "A broad overview of interactive digital marketing: A bibliometric network analysis," Journal of Business Research, Elsevier, vol. 131(C), pages 183-195.
    20. Richard Friberg & Erik Grönqvist, 2012. "Do Expert Reviews Affect the Demand for Wine?," American Economic Journal: Applied Economics, American Economic Association, vol. 4(1), pages 193-211, January.
    21. Brett R. Gordon & Robert Moakler & Florian Zettelmeyer, 2022. "Close Enough? A Large-Scale Exploration of Non-Experimental Approaches to Advertising Measurement," Papers 2201.07055, arXiv.org, revised Oct 2022.
    22. Benjamin Edelman, 2012. "Using Internet Data for Economic Research," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 189-206, Spring.
    23. Justin M. Rao & Andrey Simonov, 2019. "Firms’ reactions to public information on business practices: The case of search advertising," Quantitative Marketing and Economics (QME), Springer, vol. 17(2), pages 105-134, June.
    24. Anindya Ghose & Vilma Todri, 2015. "Towards a Digital Attribution Model: Measuring the Impact of Display Advertising on Online Consumer Behavior," Working Papers 15-15, NET Institute.

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    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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