A Dynamic Model for Digital Advertising: The Effects of Creative Format, Message Content, and Targeting on Engagement

Research Question Advertisers often use multiple creative formats in their digital campaigns to target and re-target consumers with product-based messages and price incentives. In this study, we ask the following open questions: How do carryover effects vary across animated and static ads, and their targeted consumers? What is the effect of format (size/position) on consumer engagement? What are the effects of price incentives and product ads within different digital formats? Which ad message (price vs. product) are more effective for re-targeting. Theory The study accomplished its goal by constructing a dynamic model and applying it to a panel dataset obtained from a major US retailer.The data offers a selection of daily ad impressions and their associated clicks, with both clicks and impressions disaggregated by consumer segment, ad format and message content. We propose a dynamic (state space) zero-inflated count model (Poisson), given the potential for zero-inflation and temporal correlation in count series. We estimated the resulting nonlinear/dynamic model using a combination of Particle Filtering and MCMC methods. Findings First, we find that animated ads had higher carryover effects; and thus affected engagement over a longer duration than static ads. Second, among animated formats, price ads were more effective than product ads. Third, re-targeted ads were effective only when they offered price incentives. Third, although flash ads were more effective at engaging consumers, simpler static GIF ads could also be effective; in our case, for price ads served to retargeted and female consumers. Lastly, all the retailer's ads targeted to the female segment were effective. Implications Knowing the above features of digital ads, the effects of carryover, format, target, and message could help managers improve ad engagement. This, in turn, could ultimately help firms better allocate ad resources throughout their digital advertising campaigns.