Location, Location, Location: Repetition and Proximity Increase Advertising Effectiveness

41 Pages Posted: 23 May 2013 Last revised: 3 Jun 2016

Date Written: June 2, 2016

Abstract

We examine a large-scale field experiment that measures the effect of online display advertising. Yahoo! Research and an American apparel retailer collaborated on the experiment that tracked the online and offline sales of 3 million retailer customers. We measure the impact of the frequency of advertising exposure using a simple randomized experiment: users in the ‘Full’ treatment group see the retailer’s ads, users in the ‘Control’ group see unrelated control ads, and users in the ‘Half’ treatment group see an equal probability mixture of the retailer and control ads. We find strong benefits to repeated exposures among users who see up to 50 ads, with revenues increasing approximately linearly at a rate of 4¢ per exposure. We find especially high ad effectiveness for the retailer’s best customers and those who live closest to its brick-and-mortar locations; these findings are consistent with advertising in a Hotelling model of differentiated firms.

Note: A previously released draft was entitled “Add More Ads? Experimentally Measuring Incremental Purchases Due to Increased Frequency of Online Display Advertising.”

Keywords: advertising effectiveness, field experiments, digital advertising, ad frequency, targeting

JEL Classification: M37, C93, L81

Suggested Citation

Johnson, Garrett and Lewis, Randall A. and Reiley, David, Location, Location, Location: Repetition and Proximity Increase Advertising Effectiveness (June 2, 2016). Available at SSRN: https://ssrn.com/abstract=2268215 or http://dx.doi.org/10.2139/ssrn.2268215

Garrett Johnson

Kellogg School of Management ( email )

Evanston, IL
United States

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/johnson_garrett.aspx

Randall A. Lewis

Netflix ( email )

Los Gatos, CA
United States
312-RA-LEWIS (Phone)

HOME PAGE: http://www.econinformatics.com/

David H. Reiley (Contact Author)

Pandora ( email )

2101 WEBSTER ST 16TH FLOOR
Oakland, CA 94612
United States

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