eBay Claimed Paid Search Ads Don’t Work
The research, carried out by eBay in cooperation with Berkeley and Chicago universities, found out that adverts in search engines have no measurable benefits. eBay provided the researchers with the ability to experiment with how and when it purchased search adverts.
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The results showed that most search advertisements on most search terms had almost no affect on sales, which means that the medium may already be beyond the peak of its efficacy. A lot of companies purchase adverts on searches for their brand. For example, the auction site may buy ads on searches for the term “eBay” or “eBay shoes”. But the truth is that such adverts do nothing else than encourage users to click on the ad instead of the normal search result to the same website.
According to the research, virtually all of the forgone click traffic and sales attributed to it were captured by natural search. In other words, substitution between paid and unpaid traffic was almost complete. It turned out that shutting off paid search adverts closed just one (expensive) way to eBay, but diverted traffic to natural search. The latter is, of course, free to the company.
As for those who buy space on search results for so-called “generic terms”, like “memory” or “mobile phone”, they can relax – they don’t spend money on nothing. The research revealed that organic placement for non-branded terms varies widely. This means that a website won’t show up on the front page for a search term if it doesn’t pay for generic terms. However, the researchers tried to find out whether dropping off the front page would matter to sales.
When they stopped advertising eBay entirely on non-branded search terms to 30% of the United States for 2 months, they discovered that it had insignificant effect on sales. Indeed, on average, American consumers don’t shop more on eBay when the company pays for search ads.
In addition, the adverts had no effect on a subset of eBay users: those who had just signed up, or those who had made fewer than 3 purchases in a year. The others are likely to be familiar with the site’s offerings and value proposition, and are therefore unaffected by paid search ads, going directly to the site without searching for it.
The results of this research raise significant questions about the value of the search advertising market, where Google is the biggest supplier. Last year, it made $37 billion from its various sites – 2/3 of its gross revenue.
The results showed that most search advertisements on most search terms had almost no affect on sales, which means that the medium may already be beyond the peak of its efficacy. A lot of companies purchase adverts on searches for their brand. For example, the auction site may buy ads on searches for the term “eBay” or “eBay shoes”. But the truth is that such adverts do nothing else than encourage users to click on the ad instead of the normal search result to the same website.
According to the research, virtually all of the forgone click traffic and sales attributed to it were captured by natural search. In other words, substitution between paid and unpaid traffic was almost complete. It turned out that shutting off paid search adverts closed just one (expensive) way to eBay, but diverted traffic to natural search. The latter is, of course, free to the company.
As for those who buy space on search results for so-called “generic terms”, like “memory” or “mobile phone”, they can relax – they don’t spend money on nothing. The research revealed that organic placement for non-branded terms varies widely. This means that a website won’t show up on the front page for a search term if it doesn’t pay for generic terms. However, the researchers tried to find out whether dropping off the front page would matter to sales.
When they stopped advertising eBay entirely on non-branded search terms to 30% of the United States for 2 months, they discovered that it had insignificant effect on sales. Indeed, on average, American consumers don’t shop more on eBay when the company pays for search ads.
In addition, the adverts had no effect on a subset of eBay users: those who had just signed up, or those who had made fewer than 3 purchases in a year. The others are likely to be familiar with the site’s offerings and value proposition, and are therefore unaffected by paid search ads, going directly to the site without searching for it.
The results of this research raise significant questions about the value of the search advertising market, where Google is the biggest supplier. Last year, it made $37 billion from its various sites – 2/3 of its gross revenue.
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