Advertising Spillovers: Evidence from Online Field-Experiments and Implications for Returns on Advertising

Abstract

I analyze the impact of online ads on the advertiser's competitors, using data from randomized field experiments on a restaurant-search website. I find significant positive causal effects of ads on the chances of sales for non-advertised restaurants. The spillover benefits are concentrated on restaurants that serve the advertiser's cuisine and have a high rating on the website. The extent of spillovers also depends on the intensity of the advertising effort. The spillovers are largest when the intensity (frequency) of advertising is low. As the intensity increases, the spillovers disappear and the advertiser gains more. These patterns are consistent with the following mechanism: ads increase the chance of consumers buying the advertised product, but also remind consumers of similar (non-advertised) options. Higher ad intensity leads to a stronger direct effect favoring the advertiser and can offset the spillover caused by the broader reminder.