David Reiley kicked off the 2010 India Big Thinkers Series on March 19th presenting "Does Retail Advertising Work? Measuring the Effects of Advertising on Sales via a Controlled Experiment on Yahoo".
A randomized experiment performed in co-operation between Yahoo and a major nationwide retailer allows us to measure the effects of online advertising on sales. We exploit a match of over one million customers between the databases of Yahoo and the retailer, assigning them to treatment and control groups for an online advertising campaign for this retailer and then measuring each individual’s weekly sales at this retailer, both online and in stores.
We find statistically and economically significant impacts of the advertising on sales. We estimate the total effect on revenues to be more than four times the retailer’s expenditure on advertising during the study. Additional results explore differential effects of ads on online and offline sales and on individuals who click the ads versus those who merely view them. Our results provide the best measurements to date of the effectiveness of image advertising on sales, and we shed light on important questions about online advertising in particular.
Video and event pictures are available at http://bangalore.yahoo.com/bigthinkers/event.php?id=12