Article 3 Consumer Heterogeneity and Paid Search Effectiveness

Question 1

What is being studied?

Answer 1

The causal effect of paid search ads, also called search engine marketing (SEM).

Question 2

Why is this important to study?

Answer 2

Because advertisers waste valuable money on advertising that doesn’t affect the customer.

Question 3

How and where is this research conducted?

Answer 3

Data from 30% of eBay’s U.S. traffic was gathered.
The used method is a before-during-after (or difference-in-differences) analysis, in which the paid search ads were turned off.

Question 4

What are the main findings?

Answer 4

• Organic clicks captured (almost) all paid clicks when turned on, which decreased costs for the company.
• SEM is ineffective for short-term sales.
• SEM is best to be used for small, unknown brands.
• Organic/natural search is close to a perfect substitute for paid search.

Question 5

What are the limitations?

Answer 5

• The results can be generalised for large, well-known companies, but may not be true for small and new entities that have no brand recognition.
• When paid search was turned off for eBay, the behaviour of (potential) competitors was not observed.