The Consumer Welfare Effects of Online Ads: Evidence from a 9-Year Experiment

Erik Brynjolfsson, Avinash Collis, Asad Liaqat, Daley Kutzman, Haritz Garro, Daniel Deisenroth and Nils Wernerfelt

No 32846, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Research on the causal effects of online advertising on consumer welfare is limited due to challenges in running large-scale field experiments and tracking effects over extended periods. We analyze a long-running field experiment of online advertising in which a random 0.5% subset of all users are assigned to a group that does not ever see ever ads. We recruit a representative sample of Facebook users in the ads and no-ads groups and estimate their welfare gains from using Facebook using a series of incentive-compatible choice experiments. We find no significant differences in welfare gains from Facebook. Our estimates are relatively precisely estimated reflecting our large sample size (53,166 participants). Specifically, the minimum detectable difference in median valuations at standard thresholds is $3.18/month compared to a baseline valuation of $31.95/month for giving up access to Facebook. That is, we can reject the hypothesis that the median disutility from advertising exceeds 10% of the median baseline valuation. Our findings suggest that either the disutility of ads for consumers is relatively small, or that there are offsetting benefits, such as helping consumers find products and services of interest.

JEL-codes: D12 D6 K24 M15 M37 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-com, nep-dcm, nep-exp and nep-pay
Note: IO PR
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