Does Retail Advertising Work? Measuring the Effects of Advertising on Sales via a Controlled Experiment on Yahoo!

• Activity Number: 590
• Type: Contributed
• Date/Time: Wednesday, August 4, 2010 : 2:00 PM to 3:50 PM
• Sponsor: Section on Statistics and Marketing
• Author(s): David Reiley*+ and Randall Lewis
• Companies: Yahoo! Research and Yahoo! Research
• Keywords: online advertising ; marketing ; causal inference ; field experiment

Abstract

A randomized experiment performed in cooperation between Yahoo! and a major retailer allows us to measure the effects of online advertising on sales. We exploit a match of over one million customers between the databases of Yahoo! and the retailer, assigning them to treatment and control groups for an online advertising campaign for this retailer and then measuring each individual's weekly sales at this retailer, both online and in stores. We find statistically and economically significant impacts of the advertising on sales. Additional results explore differences in online versus offline sales, and the effects of advertising on those who click the ads versus those who merely view them. We demonstrate methodological problems using cross-sectional analysis of endogenous advertising exposure, by contrast with exogenous experimental data and panel-data techniques.