Here, There, and Everywhere: Correlated Online Behaviors Can Lead to Overestimates of the Effects of Advertising

Abstract:     
Measuring the causal effects of online advertising (adfx) on user behavior is important to the health of the WWW publishing industry. In this paper, using three controlled experiments, we show that observational data frequently lead to incorrect estimates of adfx. The reason, which we label “activity bias,” comes from the surprising amount of time-based correlation between the myriad activities that users under- take online. In Experiment 1, users who are exposed to an ad on a given day are much more likely to engage in brand- relevant search queries as compared to their recent history for reasons that had nothing do with the advertisement. In Experiment 2, we show that activity bias occurs for page views across diverse websites. In Experiment 3, we track account sign-ups at a competitor’s (of the advertiser) website and find that many more people sign-up on the day they saw an advertisement than on other days, but that the true “competitive effect” was minimal. In all three experiments, exposure to a campaign signals doing “more of everything” in given period of time, making it difficult to find a suitable “matched control” using prior behavior. In such cases, the “match” is fundamentally different from the exposed group, and we show how and why observational methods lead to a massive overestimate of adfx in such circumstances.

Number of Pages in PDF File: 10

Keywords: advertising effectiveness, field experiments, browsing behavior, causal inference, selection bias

JEL Classification: J4, J1

Accepted Paper Series