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Study Questions the Effectiveness of Paid Search

7/1 14
By Ken Magill
Paid search is not as effective as many marketers think, according to a recent study. And when paid search does work, it often draws a company’s least desirable customers, at least for large, well-known brands, the study determined.
And though email isn’t mentioned, if ever there was an implied argument for experimenting with shutting off paid search to determine email’s true contribution to sales, this study may be it.
To conduct the study, researchers Thomas Blake, Chris Nosko and Steven Tadelis shut off sponsored links for eBay to certain groups of users, experimenting with branded keywords and non-branded keywords.
Not surprisingly, branded keywords, such as eBay shoes, tended to draw clicks from people already en route to the company’s web site.
The researchers halted paid branded keyword search on Yahoo! and Microsoft (MSN) while continuing to pay on Google. The result: “almost all of the forgone click traffic and attributed sales were captured by natural search,” the study said.
“Arguably, consumers who query such a narrow term intend to go to that company’s website and are seeking the easiest route there. Brand paid search links simply intercept consumers at the last point in their navigational process,” the study said. 
“[B]rand-keyword ads have no measurable short-term benefits,” said the study. Read the whole thing here.
Paid search didn’t fare much better in a similar test of non-branded keywords. Non-branded keywords did draw some new customers, but mostly resulted in the advertiser paying for clicks from current customers, the study determined.
“For non-brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative,” said the study.
According to ths study, “[S]earch advertising works only on a firm’s least active customers. These are traditionally considered a firms [sic] “worst” customers, and advertising is often aimed a high value repeat consumers. 
“Bluntly, search advertising only works if the consumer has no idea that the company has the desired product. Large firms like eBay with powerful brands will see little benefit from paid search advertising because most consumers already know that they exist, as well as what they have to offer. The modest returns on infrequent users likely come from informing them that eBay has products they did not think were available on eBay. Active consumers already know this and hence are not influenced.” 
Of course, the study was conducted using one of the most well–known online brands. Paid search most likely will be more effective for lesser known or unknown brands.
But that paid search is effective should not be taken as gospel. And testing shutting all or some of it off is certainly worth considering.

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