eBay study highlights big problem for search advertising

A study by online auction company eBay has revealed that paying for keywords to boost rankings by search engines has little effect on sales

A study by online auction firm eBay has revealed that paying for keywords to boost rankings by search engines has little effect on sales.

This was the conclusion of a study that analysed the effect on sales of removing sponsored keywords from some search engines such as MSN and Yahoo, while retaining them on Google.

In theory, a company will boost sales by ranking highly in online searches that include any keyword that it has sponsored.

However, the eBay study found that most people who clicked on sponsored search results were loyal customers already.

"Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless,” the company said.

Removing the paid search advertisements simply diverted traffic to the natural search rankings without any cost, said the study report presented at an economics conference at Stanford University.

Read more about online advertising

The research found that brand keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates.

"The efficacy of search engine marketing is weak, a conclusion that is likely to apply to other large brands that together spend billions of dollars a year on internet marketing," the report said.

Search business model

The study highlights a potential problem for search engine providers such as Google, which generated $46bn in ad revenue in 2012, said the Telegraph.

The withdrawal of paid adverts by e-commerce firms such as eBay and other strong brands would mean a substantial loss in revenue for search companies, and is bound to be a cause for concern, the paper said.

Google has built its ad business through persuading advertisers to buy keywords, such as their company name or a term like "insurance", to get a link to their website high up on Google search rankings.

Spend on search advertising in the UK alone is worth about £3bn a year, with Google accounting for around 90% of that, according to the Guardian.

Google has responded by pointing out that its own research shows search advertising has a significant effect on boosting clicks.

But the company said that because outcomes differed so much among advertisers and were influenced by many different factors, advertisers should experiment with their own campaigns.

“We provide tools such as AdWords campaign experiments and content experiments and recommend a statistical method for advertisers to conduct their own geotargeted experiments,” Google said.

Philip Alford, director of the Digital Hub in the School of Tourism at Bournemouth University, told the BBC that the size of the brand made a big difference to the effectiveness of paid searches.

Sponsored keywords could be more beneficial for smaller organisation because their websites are less likely to rank highly in natural searches.

Read more on E-commerce technology