Is neat (undiluted) application more effective?
Carrier oils, such as Fractionated Coconut Oil, help trap volatile compounds which minimizes evaporation and enhances penetration through the skin.
Large molecule carrier oils (argan oil, rose-hip oil, jojoba oil, ...) are greasy and do not absorb well. They are used to provide a layer of protection on your skin.
Small molecules, like water, absorb too quickly and do not protect/trap essential oil volatiles.
Medium-chain triglycerides of Fractionated Coconut Oil absorb well and protect essential oil volatiles from evaporating.
Topical application is great, especially using massage. It stimulates the dilution of blood vessels resulting in improved skin absorption of volatile compounds.
Here's a short article from doTERRA with even more information.