Integrating Keyword Segmentation and Budget Allocation Decisions in Sponsored Search Advertising

Budget constrained sponsored search advertisers must decide how to allocate their advertisement budget across ad campaigns and individual keywords. In this paper, a simulation model that integrates the complex issues involved in keyword segmentation and campaign organization is used to evaluate performance of various budget allocation strategies. Using the buying funnel model as the basis for keyword segmentation and campaign organization, we analyze Volume-based, Cost-based, and Clicks-based budget allocation strategies and evaluate their performance implications for different firms. The simulation model is empirically evaluated using four Fortune 500 companies and their keyword data obtained from a leading provider of keyword research technology. The results and statistical analyses show significant improvements in budget utilization using the proposed allocation strategies over a Baseline commonly used in practice. The study offers useful insights into the budget allocation problem by leveraging a theoretical framework for keyword segmentation and campaign management.

Competitive Poaching in Search Advertising: Two Randomized Field Experiments

Keyword searches with brand names enable firms to generate traffic from search advertising by bidding not only on their own keywords but also on competitors’ keywords. The strategy of bidding on competitors’ keywords, known as competitive poaching, presents unique opportunities for practitioners. This study examines factors that influence the effectiveness of competitive poaching. We collected data from two randomized field experiments, one with a business school in the Northeastern United States and the other one with a leading automobile dealership company, where these firms bid on keywords of competing brands and randomly display different types of ad copies in the sponsored search listings. We find that, when poaching on keywords of high-quality brands, ad copies that feature vertical differentiation through quality signals are more effective than the control ad copies that do not convey any differentiation or prescriptive messages. We also find that when poaching from low-quality brands, ad copies featuring horizontal differentiation through nonquality attributes perform better than the control ad copies. Finally, the presence of the poached brand’s own ad has a positive association with the ad effectiveness of the poaching brand when that poached brand is high quality and a negative association when the poached brand is low quality.

From keyword to keywords: the role of keyword portfolio variety and disparity in product sales

PurposeThis study investigates the effect of keyword portfolio characteristics on sales in paid search advertising. The authors propose two keyword portfolio characteristics (variety and disparity) and examine the effects of portfolio variety and portfolio disparity on direct and indirect sales in both PC and mobile environment.Design/methodology/approachBy conducting a field study at a large e-commerce platform, the authors use a negative binomial model to develop empirical findings that provide insights into paid search advertising strategies.FindingsFor main effect, (1) portfolio variety has a negative effect on direct sales. However, (2) portfolio disparity has positive effects on both direct and indirect sales. Advertising channels influence the contribution of keyword portfolio to sales. (3) On mobile devices, portfolio variety positively affects both direct and indirect sales. However, portfolio disparity negatively affects both direct and indirect sales. (4) On PCs, portfolio variety negatively affects both direct and indirect sales. However, portfolio disparity positively affects both direct and indirect sales on PC.Practical implicationsThe findings provide advertisers with insights into how to manage keyword portfolio between mobile devices and PCs.Originality/valueThe current study shifts the attention from keyword to keywords (keyword portfolio), which extends the paid search literature. Moreover, it also contributes to the literature by comparing the relative effectiveness of mobile and PC search advertising.

Competition in digital advertising markets

Digital advertising, both display advertising and search advertising, represents a very important part of the overall advertising market in the United Kingdom. Google and Facebook have a high degree of market power in search and display advertising, respectively. On 1 July 2020, the Competition and Markets Authority published its Final Report on its market study into online platforms and digital advertising, in which it looked in some depth at digital advertising markets, assessing whether a lack of transparency, conflicts of interest, and the leveraging of market power undermine competition in digital advertising. This article examines the issues considered by, and the findings of, the CMA in its Market Study and set out in its Final Report, and describes the policy options identified in the Market Study for promoting competition and other policy goals, such as data protection and privacy and ensuring the viability of news publishers, in digital advertising markets.