Faculty of Economics and Business Administration Publications Database

The impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value

Selected
Authors:
Bayer, Emanuel
Srinivasan, Shuba
Riedl, Edward J.
Source:
Volume: 37
Number: 4
Pages: 789 - 804
Month: 12
ISSN-Print: 0167-8116
Link External Source: Online Version
Year: 2020
Keywords: Advertising; Display advertising; Paid search advertising; Offline advertising; Sales; Firm value
Abstract:

This research examines the impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value. Using proprietary data on annualized advertising expenditures for 1651 firms spanning seven years, we document that both display advertising and paid search advertising exhibit positive effects on firm performance (measured by sales) and firm value (measured by Tobin's q). Paid search advertising has a more positive effect on sales than offline advertising, consistent with paid search being closest to the actual purchase decision and having enhanced targeting abilities. Display advertising exhibits a relatively more positive effect on Tobin's q than offline advertising, consistent with its long-term effects. The findings suggest heterogeneous economic benefits across different types of advertising, with direct implications for managers in analyzing advertising effectiveness and external stakeholders in assessing firm performance.

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