The Effect of Banner Advertising on Internet Purchasing

Abstract

This article focuses on whether banner advertising affects purchasing patterns on the Internet. Using a behavioral database that consists of customer purchases at a Web site along with individual advertising exposure, the authors measure the impact of banner advertising on current customers' probabilities of repurchase, while accounting for duration dependence. The authors model the probability of a current customer making a purchase in any given week (since the last purchase) with a survival model that uses a flexible, piecewise exponential hazard function. The advertising covariates are purely advertising variables and advertising/individual browsing variables. The model is cast in a hierarchical Bayesian framework, which enables the authors to obtain individual advertising response parameters. The results show that the number of exposures, number of Web sites, and number of pages all have a positive effect on repeat purchase probabilities, whereas the number of unique creatives has a negative effect. Returns from targeting are the highest for the number of advertising exposures. The findings also add to the general advertising literature by showing that advertising affects the purchase behavior of current (versus new) customers.