Geo-level Bayesian Hierarchical Media Mix Modeling

Media mix modeling is a statistical analysis on historical data to measure the return on investment (ROI) on advertising and other marketing activities. Current practice usually utilizes data aggregated at a national level, which often suffers from small sample size and insufficient variation in the media spend. When sub-national data is available, we propose a geo-level Bayesian hierarchical media mix model (GBHMMM), and demonstrate that the method generally provides estimates with tighter credible intervals compared to a model with national level data alone. This reduction in error is due to having more observations and useful variability in media spend, which can protect advertisers from unsound reallocation decisions. Under some weak conditions, the geo-level model can reduce ad targeting bias. When geo-level data is not available for all the media channels, the geo-level model estimates generally deteriorate as more media variables are imputed using the national level data.