To Bid or Not To Bid? Investigating Retail-Brand Keyword Performance in Sponsored Search Advertising

In Sponsored Search Advertising companies pay Search Engines for displaying their text advertisements in the context of selected queries on their Search Engine Results Pages (SERPs). The position of the ads is auctioned among all interested advertisers every time a query is executed by a user. The results are displayed separately from the organic results. Whether it is profitable for advertisers to pay for advertisements in the context of directly retail-brand related queries is a heated debate in practice between media agencies and budget responsible managers in companies. Anecdotal evidence implies that users who are searching for a specific retail-brand are conducting navigational searches and would end up on the brand owners website anyway, especially when the company is already placed prominently in the organic search results. The objective of the present research is to determine whether and under what circumstances it makes sense, in economic terms, for brand owners to pay for sponsored search ads for their own brand keywords. Using an exclusively available dataset from a major European internet-pharmacy we describe a non reactive method that is based on an A/B-test which enables us to investigate the economic value of the described behaviour. We are able to prove that the advertiser benefits significantly from these additional Sponsored Search ads which enable the company to generate more visitors (> 10 %), resulting in higher sales volumes at relatively low advertising costs even when the company is already listed in first position in the organic part of the respective SERP.

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