Online Advertising as Passive Search

83 Pages Posted: 10 May 2021 Last revised: 13 Jun 2023

See all articles by Raluca Ursu

Raluca Ursu

New York University - Stern School of Business

Andrey Simonov

Columbia University - Columbia Business School

Eunkyung An

New York University (NYU) - Leonard N. Stern School of Business

Date Written: November 27, 2022

Abstract

Standard search models assume that consumers actively decide on the order, identity, and number of products they search. We document that online, a large fraction of searches happen in a more passive manner, with consumers merely reacting to online advertisements that do not allow them to choose the timing or the identity of products to which they will be exposed. Using a clickstream panel data set capturing full URL addresses of websites consumers visit, we show how to detect whether a click is ad-initiated. We then report that in the apparel category ad-initiated clicks account for more than half of all website arrivals, are more concentrated early on in the consumer search process, and lead to less in-depth searches and fewer transactions, consistent with the passive nature of these searches. To account for these systematic differences between active and passive searches, we propose and estimate a simple model that accommodates both types of searches. Our results show that incorrectly treating all searches as active inflates the estimated value of brands that advertise frequently. Our model can more accurately recover data patterns, especially for advertising brands. We finish with model extensions and a discussion of the managerial implications.

Keywords: Sequential Search, Advertising, Online Browsing, Fashion Industry

JEL Classification: D83, L81, M31, M37

Suggested Citation

Ursu, Raluca and Simonov, Andrey and An, Eunkyung, Online Advertising as Passive Search (November 27, 2022). NYU Stern School of Business Forthcoming, Columbia Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=3841266 or http://dx.doi.org/10.2139/ssrn.3841266

Raluca Ursu

New York University - Stern School of Business ( email )

Tisch Hall
40 W 4 St.
New York, NY NA 10012
United States

Andrey Simonov (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Eunkyung An

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 West 4th Street
Tisch Hall
New York, NY NY 10012
United States

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