Do display ads influence search? Attribution and dynamics in online advertising

We develop a multivariate time series model to investigate the dynamic interaction between paid search and display ads and calibrate the model using data from a bank that uses online ads to acquire new checking account customers. The model suggests that both search and display ads exhibit dynamics that improve their effectiveness and ROI over time. Moreover, our results suggest that display ads increase search conversion. However, display ads may also increase search clicks, thereby increasing search advertising costs. After accounting for these three effects, we estimate that each $1 invested in display and search leads to a return of $1.24 for display and $1.75 for search ads. These ROI estimates are respectively 10% and 38% higher than those obtained by standard metrics, which may have led the company to under-invest. We use these results to show how optimal budget allocation may shift after accounting for attribution and dynamics. Although display benefits from synergy attribution, the strong dynamic effects of search call for an increase in search advertising budget share by up to 36% in our context.