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Measuring the Effects of Advertising: The Digital Frontier

Author

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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 Note: IO
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    References listed on IDEAS

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    1. Avi Goldfarb & Catherine Tucker, 2011. "Online Display Advertising: Targeting and Obtrusiveness," Marketing Science, INFORMS, vol. 30(3), pages 389-404, 05-06.
    2. Avi Goldfarb & Catherine E. Tucker, 2011. "Privacy Regulation and Online Advertising," Management Science, INFORMS, pages 57-71.
    3. 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.
    4. James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 313-325.
    5. Randall Lewis & David Reiley, 2014. "Online ads and offline sales: measuring the effect of retail advertising via a controlled experiment on Yahoo!," Quantitative Marketing and Economics (QME), Springer, vol. 12(3), pages 235-266, September.
    6. Tucker, Catherine E., 2012. "The economics of advertising and privacy," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 326-329.
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    Citations

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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. J. Levin & L. Einav., 2012. "Empirical Industrial Organization: A Progress Report," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 1.
    3. Jonathan Levin, 2011. "The Economics of Internet Markets," Discussion Papers 10-018, Stanford Institute for Economic Policy Research.
    4. Lint Barrage & Eric Chyn & Justine Hastings, 2014. "Advertising as Insurance or Commitment? Evidence from the BP Oil Spill," NBER Working Papers 19838, National Bureau of Economic Research, Inc.
    5. 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, pages 2927-2948.
    6. Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," Innovation Policy and the Economy, University of Chicago Press, pages 65-90.
      • Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," NBER Chapters,in: Innovation Policy and the Economy, Volume 12, pages 65-89 National Bureau of Economic Research, Inc.
    7. 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, pages 2927-2948.
    8. Fabian Bergès & Sylvette Monier-Dilhan, 2013. "Mass Retailers' Advertising Strategies Against Commodity Stores," Economics Bulletin, AccessEcon, vol. 33(4), pages 2968-2981.
    9. 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.
    10. 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.
    11. 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).
    12. Benjamin Edelman, 2012. "Using Internet Data for Economic Research," Journal of Economic Perspectives, American Economic Association, vol. 26(2), pages 189-206, Spring.
    13. 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.
    14. 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.
    15. 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.

    More about this item

    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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