Publications
Publications
- 2016
- HBS Working Paper Series
Effectiveness of Paid Search Advertising: Experimental Evidence
By: Weijia (Daisy) Dai and Michael Luca
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
Citation
Dai, Weijia (Daisy), and Michael Luca. "Effectiveness of Paid Search Advertising: Experimental Evidence." Harvard Business School Working Paper, No. 17-025, October 2016.