An Experimental Investigation of the Effects of Retargeted Advertising: The Role of Frequency and Timing

In collaboration with BuildDirect.com, an online seller of home-improvement products, we conduct a large-scale randomized field experiment to study the effects of retargeted advertising -- a form of internet advertising in which banner ads are displayed to users after their visit to the advertiser's web site. We find that retargeting increases consumer engagement with the website. Turning the advertising on causes 14.6% more users to return to the website in four weeks. We find that the effectiveness of advertising decreases as the time since the consumer first visits the website increases. 30% of the effect of first week's advertising occurs on the very first day. Further, we also find clear evidence of the existence of complementarities in advertising over time – the effect of advertising in week 2 (the second week after the campaign started) is higher when the user was allocated to non-zero level of advertising in week 1. Taken together, our findings stand at odds with the view that retargeted ads inform or remind consumers of the advertised product. They are consistent with a “defensive” or a “competition-blocking” role of advertising.