Online Ads and O✏ine Sales: Measuring the E↵ects of Retail Advertising via a Controlled Experiment on Yahoo!

A randomized experiment with 1.6 million customers measures positive causal e↵ects of online advertising for a major retailer. The advertising profitably increases purchases by 5%. 93% of the increase occurs in brick-and-mortar stores; 78% of the increase derives from consumers who never click the ads. Our large sample reaches the statistical frontier for measuring economically relevant e↵ects. We improve econometric e ciency by supplementing our experimental variation with non-experimental variation caused by consumer browsing behavior. Our experiment provides a specification check for observational di↵erence-in-di↵erences and cross-sectional estimators; the latter exhibits a large negative bias three times the estimated experimental e↵ect.