Measuring the Effects of Advertising: The Digital Frontier
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Chapter in forthcoming NBER book Economic Analysis of the Digital Economy, Avi Goldfarb, Shane Greenstein, and Catherine Tucker, editors
Online advertising offers unprecedented opportunities for measurement. A host of new metrics, clicks being the leading example, have become widespread in advertising science. New data and experimentation platforms open the door for firms and researchers to measure true causal effects of advertising on a variety of consumer behaviors, such as purchases. We dissect how the new metrics and methods can be used to provide insight on the returns to advertising by setting out the questions that we think can be answered by current data and methods, those that we believe will be in play within five years, and those that we believe could not be answered with arbitrarily large and detailed data. We pay close attention to the advances in computational advertising that are not only increasing the impact of advertising with algorithmic targeting, but also by shifting the focus from "who to hit" to "what do I get."
This paper was revised on May 21, 2014Measuring the Effects of Advertising: The Digital Frontier, Randall Lewis, Justin M. Rao, David H. Reiley
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