Effects of Internet Display Advertising in the Purchase Funnel: Model-Based Insights from a Randomized Field Experiment

Abstract

This study examines the effects of Internet display advertising using cookie-level data from a field experiment at a financial tools provider. The experiment randomized assignment of cookies to treatment (firm ads) and control conditions (charity ads), enabling the authors to handle different sources of selection bias, including targeting algorithms and browsing behavior. They analyze display ad effects for users at different stages of the company's purchase funnel (i.e., nonvisitor, visitor, authenticated user, and converted customer) and find that display advertising positively affects visitation to the firm's website for users in most stages of the purchase funnel, but not for those who previously visited the site without creating an account. Using a binary logit model, the authors calculate marginal effects and elasticities by funnel stage and analyze the potential value of reallocating display ad impressions across users at different stages. Expected visits increase almost 10% when display ad impressions are partially reallocated from nonvisitors and visitors to authenticated users. The authors also show that results from the controlled experiment data differ significantly from those computed using standard correlational approaches.