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Publications
  • 2016
  • Working Paper
  • HBS Working Paper Series

Effectiveness of Paid Search Advertising: Experimental Evidence

By: Weijia (Daisy) Dai and Michael Luca
  • Format:Print
  • | Language:English
  • | Pages:19
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Abstract

Paid search has become an increasingly common form of advertising, comprising about half of all online advertising expenditures. To shed light on the effectiveness of paid search, we design and analyze a large-scale field experiment on the review platform Yelp.com. The experiment consists of roughly 18,000 restaurants and 24 million advertising exposures—randomly assigning paid search advertising packages to more than 7,000 restaurants for a three-month period, with randomization done at the restaurant level to assess the overall impact of advertisements. We find that advertising increases a restaurant’s Yelp page views by 25% on average. Advertising also increases the number of purchase intentions—including getting directions, browsing the restaurant’s website, and calling the restaurant—by 18%, 9%, and 13%, respectively, and raises the number of reviews by 5%, suggesting that advertising also affects the number of restaurant-goers. All advertising effects drop to zero immediately after the advertising period. A back-of-the-envelope calculation suggests that advertising would produce a positive return on average for restaurants in our sample.

Keywords

Internet and the Web; Performance; Digital Marketing; Service Industry

Citation

Dai, Weijia (Daisy), and Michael Luca. "Effectiveness of Paid Search Advertising: Experimental Evidence." Harvard Business School Working Paper, No. 17-025, October 2016.
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About The Author

Michael Luca

Negotiation, Organizations & Markets
→More Publications

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More from the Authors
  • Scapegoating and Discrimination in Times of Crisis: Evidence from Airbnb By: Michael Luca, Elizaveta Pronkina and Michelangelo Rossi
  • Strategic Complexity? Using Experiments to Understand and Overcome Obfuscation By: Michael Luca, Ginger Zhe Jin and Daniel Martin
  • Determinants of Small Business Reopening Decisions After COVID Restrictions Were Lifted By: Dylan Balla-Elliott, Zoë B. Cullen, Edward L. Glaeser, Michael Luca and Christopher Stanton
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