An empirical test to measure the effectiveness of online advertising in online marketplaces using a hierarchical Bayes model

Online marketplace, taken the form of ‘‘open market’’ where a very large number of buyers and sellers participate, has occupied a rapid increasing position in e-commerce, which resulting in sellers’ increasing investment on online advertising. Hence, there is a growing need to identify the effectiveness of online advertising in the online marketplaces such as eBay.com. However, it is problematic to directly apply the existing online advertising effect models for click-through data of online marketplaces. Therefore, there is a need for developing a model to estimate the effectiveness of online advertising in online marketplace considering its characteristics. In this paper, we develop an analytical Bayesian approach to modeling click-though data by employing the Poisson–gamma distribution. Our results have implications for online advertising effect measurement, and may help guide advertisers in decision-making. 2011 Elsevier Ltd. All rights reserved.