Gauge the Effects of Targeted Advertising along the Consumer Funnel

Abstract

Targeted display advertising for individual consumers has become pervasive on social media platform and other online websites (traditional platform). Yet, the effectiveness of targeted advertising across online platforms is not well understood. Moreover, such advertising effect may be different for different types of consumers, i.e. consumers in the early stage and those in the late stage, relative to the final purchase stage. This paper aims at assessing the effectiveness of targeted advertising across online platforms on consumers' final conversion (purchase). In addition, we measure the complementarity and substitutability of online platforms for targeted advertising for upper funnel (early-stage) consumers and lower funnel (late-stage) consumers. We use machine learning techniques to form case-control designs analyzed employing regularized discrete choice models to select relevant features explaining the final conversion. The empirical analysis shows that (1) targeting across platforms is positively associated with the final conversion for the lower funnel consumers, but there is no measurable synergistic effect for the upper funnel consumers; (2) the main effect of targeting on social media is positively related to the final conversion for consumers in the upper funnel but has no significant impact for lower funnel consumers. We leverage upon these findings to discuss actionable managerial prescriptions.