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

March 10th, 2010

March 19, 2010
3:00 PM-5:00 PM
Grand Ballroom, The Leela, Bangalore

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Abstract
A randomized experiment performed in co-operation between Yahoo! and a major nationwide 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. We estimate the total effect on revenues to be more than four times the retailer’s expenditure on advertising during the study. Additional results explore differential effects of ads on online and offline sales and on individuals who click the ads versus those who merely view them. Our results provide the best measurements to date of the effectiveness of image advertising on sales, and we shed light on important questions about online advertising in particular.

David Reiley is a Principal Research Scientist and a pioneer in the use of field experiments in economics. He has used field experiments to test theories of auction bidding and charitable fundraising, and is currently using experiments to measure the effects of display advertising on advertisers’ sales. Before joining Yahoo! Research, David worked at the Arizona Public Service Professor of Economics at the University of Arizona.

He previously taught at Vanderbilt University and has been a visiting professor at the Kiev School of Economics (Ukraine), the European University Institute (Florence, Italy), and the Kellogg School of Management at Northwestern University. David is the Co-Editor for Field Experiments at Economic Inquiry, and serves on the editorial boards of Experimental Economics and the BE Press Journals of Economic Analysis and Policy. David holds a bachelor’s degree in Astrophysical Sciences from Princeton University, and a PhD in economics from MIT

Entry Filed under: talks-tech

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