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

Weijia Dai (), Hyunjin Kim () and Michael Luca ()
Additional contact information
Weijia Dai: Purdue University
Hyunjin Kim: INSEAD
Michael Luca: Harvard Business School, Negotiation, Organizations & Markets Unit

No 17-025, Harvard Business School Working Papers from Harvard Business School

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.

Pages: 71 pages
Date: 2016-10, Revised 2023-01
New Economics Papers: this item is included in nep-exp, nep-mkt and nep-net
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Citations: View citations in EconPapers (4)

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