eBay claims paid search ads have 'no measurable benefit'

06/06/2014

Web users are just as likely to click on natural search results as paid ads, according to new US research from eBay.

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eBay published the claim in a paper ‘Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment’ published in conjunction with Berkeley and Chicago universities.

The auction site gave its own researcher Thomas Blakey, as well as Chicago's Chris Nosko and Berkeley's Steven Tadelis, the ability to experiment with how and when the company bought search adverts.

The researchers found that most search adverts on most search terms had very little affect on sales at all – and warn that the medium may be "beyond the peak of its efficacy."

Findings revealed that non-branded keywords such as ‘shoes’ do have a positive impact on new users, and on influencing purchases by infrequent users.

The study found that targeting uniformed users is still a critical factor for successful advertising, but customers who frequently use sites such as eBay are not influenced by non-brand keywords.

Prior to the study, researchers believed that many users who search for words such as ‘eBay’ are simply doing so to navigate themselves to the site.

If so, the study states: ‘There would be little need to advertise for these terms and intercept those searches because the natural search results will serve as an almost perfect substitute.’

To test this theory, eBay halted advertising for its brand related terms on Yahoo! and MSN.

Once suspended, the paid clicks were driven down to zero. This led to a noticeable uptake in natural clicks, with 99.5 per cent immediately captured by natural search traffic.

The study writes: ‘This is strong evidence that the removal of the advertisement raises the prominence of the eBay natural search result. Since users intend to find eBay, it is not surprising that shutting down the paid search path to their desired destination simply diverts traffic to the next easiest path, natural search, which is free to the advertiser.’

The researchers had slightly better news for advertisers who buy space on search results for generic terms, such as "memory", "cell phone" or "used gibson les paul".

View a sample from the research paper below:

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"Unlike branded search, where a firm's website is usually in the top organic search slot, organic placement for non-branded terms vary widely," meaning that a site can't guarantee it will show up on the front page for a search term unless it pays.

The findings raise significant questions about the value of the search advertising market.

"Of the $31.7bn that was spent in the US in 2011 on internet advertising, estimates project that the top 10 spenders in this channel account for about $2.36bn… our study suggests that much of what is spent on internet advertising may be beyond the peak of its efficacy."

Google is the biggest seller of search adverts in the world. In 2013, the company made $37bn from its various websites, a full two thirds of its gross revenue. The company doesn't break down revenue beyond that, but it is believed that the majority of its income comes from search advertising.

View the paper here

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