Increasing the effectiveness of display social media ads for startups: The role of different claims and executional characteristics

Abstract

Although social media ads are the preferred advertising format for entrepreneurs, the literature has paid little attention to this advertising form in the startup context. In collaboration with a startup, we conducted randomized field experiments reaching more than 800,000 potential customers to assess the effectiveness of display social media ads and explore how different claims and executional characteristics impact this effectiveness. The experiments were the company’s first advertising campaign in an effort to expand to a new country. Our analyses show that the elasticity of display social media ads is equal to 0.815 and 98% of the effect occurs within two hours. We also find that adding informative claims to an ad reduces the click-through rate (CTR) by between 24.8% and 43%. Regarding executional characteristics, we find that ad repetition significantly increases the CTR by 19.9%, whereas including a character and using gender-congruity in ads do not significantly increase their CTR.