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Paid Search Engine Ads Offer No Benefit, eBay Study Finds

Paid Search Engine Ads Offer No Benefit, eBay Study Finds
New research suggests paid search engine ads don't really work. / Credit: Search image via Shutterstock

Businesses investing in paid search-engine ads often aren't getting their money's worth, new research suggests.

A study by researchers at the University of California, Berkeley's Haas School of Business, the University of Chicago and eBay studied whether consumers are more likely to click on paid search-engine ads than on free, organic search results.

"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," said Steven Tadelis, one of the study's authors and an economist at the Haas School of Business. [SEO for Small Business: The Past, Present & Future of Search Engine Optimization]

To measure the effectiveness of paid search-engine ads, the researchers turned off eBay's paid search in 68 direct marketing areas in the United States. After turning off the paid ads, consumers who typed in the search term "white blouse," for example, in these markets 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. They 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. They found that consumer sales resulting from the paid search showed no measurable increase compared with those who made purchases via unpaid channels, such as organic searches, or by visiting eBay.com directly.

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 when the paid search was turned on.

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

Additionally, 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 result below the Macy's paid ad. Therefore, Tadelis said 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," Tadelis said.

On any given day, advertisers — including eBay — bid on millions of keywords. Tadelis hopes the team's 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.

The study was co-authored by Thomas Blake, an economist on the economics research team that Tadelis started at eBay, and former eBay economist Chris Nosko of the University of Chicago.

Originally published on BusinessNewsDaily.

Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.