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Which Firms Gain from Digital Advertising? Evidence from a Field Experiment

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Listed:
  • Weijia Dai
  • Hyunjin Kim
  • Michael Luca

Abstract

Measuring the returns of advertising opportunities continues to be a challenge for many businesses. We design and run a field experiment in collaboration with Yelp across 18,294 firms in the restaurant industry to understand which types of businesses gain more from digital advertising. We randomly assign 7,209 restaurants to freely receive Yelp’s standard ads package for three months. The scale of the experiment gives us a unique opportunity to assess the heterogeneity in advertising effectiveness across a variety of business attributes. We find that restaurants that receive advertising on Yelp observe on average a 7-19% increase in a wide range of purchase intention outcomes, as well as a 5% increase in customer reviews. We find that gains are heterogeneous across firms, with independent and higher-rated businesses observing larger gains, as well as those with more reviews and higher pre-experiment organic traffic.

Suggested Citation

  • Weijia Dai & Hyunjin Kim & Michael Luca, 2023. "Which Firms Gain from Digital Advertising? Evidence from a Field Experiment," NBER Working Papers 30925, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30925
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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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