Featured Research

from universities, journals, and other organizations

Internet advertising: Paid search ads don't always pay off, study finds

Date:
January 22, 2014
Source:
University of California, Berkeley Haas School of Business
Summary:
Businesses spend billions to reach customers through online advertising but just how effective are paid search ads? Using data from eBay, economists compared whether consumers are more likely to click on paid ads than on free, generic search results and found that advertisers may not be getting their money’s worth.

Businesses spend billions to reach customers through online advertising but just how effective are paid search ads? Using data from eBay, economist Steven Tadelis at UC Berkeley's Haas School of Business compared whether consumers are more likely to click on paid ads than on free, generic search results and found that advertisers may not be getting their money's worth.

"We found that when you turn off the paid advertising, almost all of the traffic that came through the paid search is just substituted by the other free channels," says Tadelis, associate professor in the Haas Business and Public Policy Group.

Tadelis conducted the study, "Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment," at eBay. The study was co-authored by Thomas Blake, an economist in the economics research team that Tadelis started at eBay, and former eBay economist Chris Nosko of the University of Chicago.

To measure the effectiveness of paid search, the researchers turned off eBay's paid search in 68 direct marketing areas in the U.S. In other words, if a consumer typed in the search term "white blouse" while online in these markets, he or she would only see the generic search results at the top of the list; not the paid ad that typically appears in a shaded box at the top of the search. She would not see any retail ads by eBay for "white blouse" but only from other advertisers who bid on the "white blouse" keywords.

At the end of 60 days, Tadelis and his colleagues compared sales of two groups: one group that received no paid search results and another group in which paid search remained untouched. Again, consumer sales as a result of the paid search showed no measurable increase off those who made purchases via unpaid channels (such as organic searches, or directly visiting eBay.com).

In order to ensure the robustness of their results, in a second experiment, the researchers also eliminated eBay's paid keyword searches throughout the country and then compared sales for that period to an equivalent period with paid search on.

"If advertising is indeed a strong driver of sales, we should have seen sales plummet," says Tadelis. "But the impact on sales was indistinguishable and not significantly different than zero."

Furthermore, for "brand" keywords such as "eBay" or other company name keywords, paid ads sit just above the generic search results. For example, a search for "Macy's" results in a Macy's free search below the Macys paid ad. Consequently, Tadelis says the paid search result adds no additional benefit to the advertiser. "It's not that clicking on the result caused engagement, it's that the intent to engage caused people to click on it," says Tadelis.

On any given day advertisers, including eBay, bid on millions of keywords. Tadelis hopes their work will encourage other e-commerce businesses to conduct this type of microeconomic research to better measure the impact of paid search traffic on the web.


Story Source:

The above story is based on materials provided by University of California, Berkeley Haas School of Business. Note: Materials may be edited for content and length.


Cite This Page:

University of California, Berkeley Haas School of Business. "Internet advertising: Paid search ads don't always pay off, study finds." ScienceDaily. ScienceDaily, 22 January 2014. <www.sciencedaily.com/releases/2014/01/140122091315.htm>.
University of California, Berkeley Haas School of Business. (2014, January 22). Internet advertising: Paid search ads don't always pay off, study finds. ScienceDaily. Retrieved July 25, 2014 from www.sciencedaily.com/releases/2014/01/140122091315.htm
University of California, Berkeley Haas School of Business. "Internet advertising: Paid search ads don't always pay off, study finds." ScienceDaily. www.sciencedaily.com/releases/2014/01/140122091315.htm (accessed July 25, 2014).

Share This




More Computers & Math News

Friday, July 25, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Bill Gates: Health, Agriculture Key to Africa's Development

Bill Gates: Health, Agriculture Key to Africa's Development

AFP (July 24, 2014) Health and agriculture development are key if African countries are to overcome poverty and grow, US software billionaire Bill Gates said Thursday, as he received an honourary degree in Ethiopia. Duration: 00:36 Video provided by AFP
Powered by NewsLook.com
Creative Makeovers for Ugly Cellphone Towers

Creative Makeovers for Ugly Cellphone Towers

AP (July 24, 2014) Mobile phone companies and communities across the country are going to new lengths to disguise those unsightly cellphone towers. From a church bell tower to a flagpole, even a pencil, some towers are trying to make a point. (July 24) Video provided by AP
Powered by NewsLook.com
Robot Parking Valet Creates Stress-Free Travel

Robot Parking Valet Creates Stress-Free Travel

AP (July 23, 2014) 'Ray' the robotic parking valet at Dusseldorf Airport in Germany lets travelers to avoid the hassle of finding a parking spot before heading to the check-in desk. (July 23) Video provided by AP
Powered by NewsLook.com
Facebook Earnings Put Smile on Investors Faces

Facebook Earnings Put Smile on Investors Faces

Reuters - Business Video Online (July 23, 2014) Facebook earnings beat forecasts- with revenue climbing 61 percent. Bobbi Rebell reports. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

    Health News

      Environment News

        Technology News



          Save/Print:
          Share:

          Free Subscriptions


          Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

          Get Social & Mobile


          Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

          Have Feedback?


          Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
          Mobile: iPhone Android Web
          Follow: Facebook Twitter Google+
          Subscribe: RSS Feeds Email Newsletters
          Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins