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

Author

Listed:
  • Weijia Dai

    (Purdue University, West Lafayette, Indiana 47906)

  • Hyunjin Kim

    (INSEAD, 77300 Fontainebleau, France)

  • Michael Luca

    (Harvard Business School, Boston, Massachusetts 02163; National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

Measuring the returns of advertising opportunities continues to be a challenge for many businesses. We design and run a field experiment on a large review platform 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 the platform’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 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. "Frontiers: Which Firms Gain from Digital Advertising? Evidence from a Field Experiment," Marketing Science, INFORMS, vol. 42(3), pages 429-439, May.
    • Handle: RePEc:inm:ormksc:v:42:y:2023:i:3:p:429-439
    DOI: 10.1287/mksc.2023.1436
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    References listed on IDEAS

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