16 April 2014

Digital Marketing

The introduction of online metrics, such as click through rate (CTR) and cost per acquisition (CPA), by online advertisers has made it easy for marketing managers to justify online ad spending. But these metrics suffer from two key problems: (a) they do not account for attribution, since they give credit to the last click and ignore the impact of other ad formats, and (b) they ignore the dynamics, since they only account for the immediate impact of ads.... In this paper, we use time series models to infer the interaction between search and display ads and also capture their impact over time.
Examining data from a bank that used online advertising to acquire new customers for its checking account, we found display ads have a significant impact on search applications, as well as clicks. The majority of this spillover was not instant, but took effect only after two weeks. On the other hand, search advertising did not lead to an increase in display applications. But search ads showed significant dynamic effects on search applications that made them very cost effective in the long run.
Classic metrics used in practice are highly biased as they do not account for the effects documented in this study. So, firms may be making suboptimal budget allocation decisions. Managers should carefully consider the interaction and dynamic effects of search and display advertising.
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