"Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment" with Thomas Blake and Steven Tadelis. forthcoming, Econometrica.
Coverage: Slate; The Atlantic; Economist; Harvard Busines Review; BBC
Internet advertising has been the fastest growing advertising channel in recent years with paid search ads comprising the bulk of this revenue. We present results from a series of large-scale field experiments done at eBay that were designed to measure the causal effectiveness of paid search ads. Because search clicks and purchase intent are correlated, we show that returns from paid search are a fraction of non-experimental estimates. As an extreme case, we show that brand-keyword ads have no measurable short-term benefits. For non-brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative.
"Supply responses to digital distribution: Recorded music and live performances" with Julie Mortimer and Alan Sorensen. Information Economics and Policy 24 (2012) pp 3-14.
Technologies that enable free redistribution of digital goods (e.g., music, movies, software, books) can undermine sellers’ ability to proﬁtably sell such goods, which raises concerns about the future development of socially valuable digital products. In this paper we explore the possibility that broad, illegitimate distribution of a digital good might have offsetting effects on the demand for complementary non-digital goods. We examine the impact of ﬁle-sharing on sales of recorded music and on the demand for live concert performances. We provide evidence suggesting that while ﬁle-sharing reduced album sales, it simultaneously increased demand for concerts. This effect is most pronounced for small artists, perhaps because ﬁle-sharing boosts awareness of such artists. The impact of ﬁle-sharing on large, well-known artists’ live performances is negligible.