The value of advertising on Google’s AdWords PPC platform is questioned by eBay.
The research- Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment by eBay has found that paying for advertising in the form of keywords on search engines has little effect on sales.
Search engines like Google, Yahoo and Bing sell companies the option to “buy” links to keywords.
The eBay study found that most people who clicked through as a result of this service were loyal customers who would have come to the site anyway.
“Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels,” said an eBay representative.
In carrying out the study, presented at an economics conference held at Stanford University, eBay removed its paid-search keywords from MSN and Yahoo platforms in the US, while retaining them on Google.
They found that without the advertising, users still clicked through as the organic- free results appeared on the search engine anyway.
“Removal of these advertisements simply raised the prominence of the eBay natural search result,” read the report by Thomas Blake, Chris Nosko, and Steve Tadelis from eBay.
“Shutting paid search advertisements closed one (costly) path to a firm’s website but diverted traffic to the next easiest path (natural search), which is free to the advertiser.”
There is no suggestion that eBay now plans to change the way in which it currently spends on search engine advertising.
But it is interesting that a lot of people still are paying for terms that actually appear quite high up the listings in the search results anyway.
We at Dynamic Solutions have long questioned the point- or value of bidding for your own brand name on the search engines. After all if potential customers already know your business and brand name they are far more likely to go straight there.