Paying to be found online

Are any retailers more efficient than others at sponsoring search ads? If so, what factors explain that efficiency?

Customers often find online retailers when they use search engines like Google or Bing. For example, type “flowers” into Google’s web page, and it may show you links for FTD or 1-800-Flowers. Those florists appear there partly because they have flower-related websites. But they likely also paid Google to display their links after keyword searches for “flowers”.

“Sponsored search advertising” is popular with retailers and provides the largest revenue source for search engines. However, it’s difficult for retailers to design attractive websites and sponsor appropriate keywords while controlling costs. There are many stories of retailers overpaying for keywords, but little research to confirm this. Are any retailers more efficient than others at sponsoring search ads? If so, what factors explain that efficiency?

Associate professor Anteneh Ayanso addressed these questions by analyzing Google-based marketing data for 200 online retailers. He and his coauthor found significant differences in advertising efficiency among these firms.

Among online-only retailers like Amazon, the major differences were in the search rankings, or how close to the top-of-search result pages their ads appeared.

Among retailers like Staples that also run physical stores, the largest differences were in the rates that consumers viewed ads, clicked on links and made purchases. Interestingly, multi-channel retailers tended to be more efficient advertisers than the online-only ones.

Ayanso expects this research will help retailers choose keywords, allocate ad budgets, and manage ad campaigns. It should also assist search engine firms to provide better-targeted exposure for the keywords they sell.

Anteneh Ayanso is an associate professor of information systems. He teaches and researches in the area of data management, business analytics, electronic commerce and electronic government. His research in data management and analytics focuses on efficient search and retrieval methods for customer-centric exploratory database queries in application domains. His research in electronic commerce and electronic government investigates Web-based technologies and functionalities and their impacts on business performance. He received the 2015 Departmental Researcher of the Year Award within Finance, Operations, and Information Systems.

Ayanso, A. and Mokaya, B. (2013). Efficiency Evaluation in Search Advertising. Decision Sciences,44(5), 877-913.