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

71 Pages Posted: 4 Oct 2016 Last revised: 31 Jan 2023

See all articles by Daisy Dai

Daisy Dai

Purdue University, Krannert School of Management

Hyunjin Kim

Harvard University - Business School (HBS)

Michael Luca

Harvard University - Business School (HBS)

Date Written: January 20, 2023

Abstract

Measuring the returns of advertising opportunities continues to be a challenge for many businesses. We design and run a field experiment in collaboration with Yelp 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 Yelp’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 on Yelp 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

Dai, Daisy and Kim, Hyunjin and Luca, Michael, Which Firms Gain from Digital Advertising? Evidence from a Field Experiment (January 20, 2023). Harvard Business School NOM Unit Working Paper No. 17-025, Available at SSRN: https://ssrn.com/abstract=2847084 or http://dx.doi.org/10.2139/ssrn.2847084

Daisy Dai

Purdue University, Krannert School of Management ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Hyunjin Kim

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Michael Luca (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Boston, MA 02163
United States

HOME PAGE: http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facId=602417

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