Parallel Experimentation and Competitive Interference on Online Advertising Platforms
Abstract
This paper studies the measurement of advertising effects on online platforms when parallel experimentation occurs, that is, when multiple advertisers experiment concurrently. It provides a framework that makes precise how parallel experimentation affects the experiment’s value: while ignoring parallel experimentation yields an estimate of the average effect of advertising in place, which has limited value in decision making in an environment with variable advertising competition, accounting for parallel experimentation captures the actual uncertainty advertisers face due to competitive actions. It then implements an experimental design that enables the estimation of these effects on JD.com, a large e-commerce platform that is also a publisher of digital ads. Using traditional and kernel-based estimators, it shows that not accounting for competitive actions can result in the advertiser inaccurately estimating the advertising lift by a factor of two or higher, which can be consequential for decision making.
History: Olivier Toubia served as the senior editor for this article.
Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mksc.2022.0194.
