Media Mix Model Calibration With Bayesian Priors

Effective model calibration is a critical and indispensable component in developing Media Mix Models (MMMs). One advantage of Bayesian-based MMMs lies in their capacity to accommodate the information from experiment results and the modelers' domain knowledge about the ad effectiveness by setting priors for the model parameters. However, it remains ambiguous about how and which Bayesian priors should be tuned for calibration purpose. In this paper, we propose a new calibration method through model reparameterization. The reparameterized model includes Return on Ads Spend (ROAS) as a model parameter, enabling straightforward adjustment of its prior distribution to align with either experiment results or the modeler's prior knowledge. The proposed method also helps address several key challenges regarding combining MMMs and incrementality experiments. We use simulations to demonstrate that our approach can significantly reduce the bias and uncertainty in the resultant posterior ROAS estimates.

• Algorithms and Theory

• Economics and Electronic Commerce