| Abstract: |
Measuring the returns of advertising opportunities continues to be a challenge
for many businesses. We design and run a field experiment in collaboration
with Yelp across 18, 294 firms in the restaurant industry to understand which
types of businesses gain more from digital advertising. We randomly assign 7,
209 restaurants to freely receive Yelp’s standard ads package for three
months. The scale of the experiment gives us a unique opportunity to assess
the heterogeneity in advertising effectiveness across a variety of business
attributes. We find that restaurants that receive advertising on Yelp observe
on average a 7-19% increase in a wide range of purchase intention outcomes, as
well as a 5% increase in customer reviews. We find that gains are
heterogeneous across firms, with independent and higher-rated businesses
observing larger gains, as well as those with more reviews and higher
pre-experiment organic traffic. |