47 Pages Posted: 8 Oct 2012 Last revised: 18 Dec 2015
Date Written: August 17, 2012
In this paper, we address the problem of advertising attribution by developing a Hidden Markov Model (HMM) of an individual consumer's behavior based on the concept of a conversion funnel. We apply the model to a unique dataset from the online campaign for the launch of a car. We observe that different ad formats, e.g. display and search ads, affect consumers differently based on their states in the decision process. Display ads usually have an early impact on the consumer, moving her from a disengaged state to an state in which she interacts with the campaign. On the other hand, search ads have a pronounced effect across all stages. Further, when the consumer interacts with these ads (e.g. by clicking on them), the likelihood of a conversion increases considerably. Finally, we show that attributing conversions based on the HMM provides fundamentally different insights into ad effectiveness relative to the commonly used approaches for attribution. Contrary to the common belief that display ads are not useful, our results show that display ads have a significant effect on the early stages of the conversion process. Furthermore, we show that only a fraction of online conversions are driven by online ads.
Keywords: Online ad attribution, multi-channel attribution, online advertising, display ads, search ads, HMM, purchase funnel
JEL Classification: C33
Suggested Citation: Suggested Citation
Abhishek, Vibhanshu and Fader, Peter and Hosanagar, Kartik, Media Exposure through the Funnel: A Model of Multi-Stage Attribution (August 17, 2012). Available at SSRN: https://ssrn.com/abstract=2158421 or http://dx.doi.org/10.2139/ssrn.2158421
By Ron Berman