Search Advertising

Search engines enable advertisers to target consumers based on the query they have entered. In a framework in which consumers search sequentially after having entered a query, I show that such targeting reduces search costs, improves matches and intensifies price competition. However, a profit-maximizing monopolistic search engine imposes a distortion by charging too high an advertising fee, which may negate the benefits of targeting. The search engine also has incentives to provide a suboptimal quality of sponsored links. Competition among search engines can increase or decrease welfare, depending on the extent of multi-homing by advertisers. (JEL D43, D83, L13, L86, M37)

Making sponsored search ads work better

Purpose – This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach – This briefing is prepared by an independent writer who adds impartial comments and places the article in context. Findings – Sponsored search accounts for around half of the current market which is dominated by major players Google, Yahoo and Bing. This process refers to advertisements chosen for each page and secured by companies that succeed in a bidding contest. Firms pay the search engines when users click on the sponsored links within their advertisement. When it comes to effective ways of attracting customers, sponsored search is up with the best of them. Not surprisingly, competition in the environment is becoming ever tougher. It is thus vital that businesses find ways to enhance the performance of their ads. Practical implications – The paper provides strategic insights and practical thinking that have influenced some of the world’s leading organizations. Originality/value – The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Search Engine Advertising (SEA) Or Organic Links: Do Customers See The Difference?

This study seeks to investigate the perceptions and attitudes of internet users toward the sponsored link. In light of this study, respondents do not express greater bias with sponsored links in comparison with traditional advertising media, as well as in comparison with organic links. Among factors that mostly affect searchers attitudes, the informativeness is the critical factor; however, no specific category of information will significantly increase the respondents likelihood to explore a sponsored link. It is rather text relevance to the keyword typed by the searcher that makes a link attractive. Results also indicate that business students recognize a great value and potential benefits of using search engine advertising as a marketing tool.

Sponsored Search as a Strategic E-service

In addition to helping consumers navigate the web search engines offer a new kind of e-service known as sponsored search. A search engine provides an auction interface to advertisers that allows them to be included in a list of sponsored links. Consumers then search the list to find the best deal. This paper uses a version of traditional consumer price search models from economic theory to evaluate the extent to which consumers and advertisers can rely on sponsored search as an effective strategic infomediary. The article also describes steps that the manager of the search engine can take to improve the sponsored search service. The findings are relevant to web advertising as well as to mobile advertising.

Nonlinear Pricing in E-Commerce

Internet markets are usually under the command of a market intermediary that charges fees for its services. Differences in quality across items being sold allow the market intermediary to employ lucrative nonlinear pricing strategies and to offer different levels of service. For several years now, eBay has been using a nonlinear pricing policy that offers sellers the opportunity of having their items listed first when buyers search for specific products in return for an additional fee. A similar pricing strategy is also used in other online markets like Overstock.com and ArtByUs.com, and is also employed by search engines when sponsored links are displayed first. In this paper we analyze this topic from a theoretical and empirical perspective. Intuitively, potential buyers are more likely to examine items listed first and sellers of high quality items are more likely to pay an extra fee in order to have preferential access to buyers. In the theoretical section of the paper we analyze the optimal pricing policy of the market intermediary in a market with heterogeneous goods. In the empirical sections of the paper we analyze a unique panel of approximately 2,200 art auctions from artists who sell their own work through eBay. We use our data to quantify the overall impact of this pricing policy on the revenues of the sellers and the market intermediary. As expected, this pricing policy creates a selection effect by which sellers of the most valuable paintings are willing to pay an extra fee in order to gain access to a large pool of potential buyers. Our results also indicate that the pricing policy implemented by eBay increases revenues significantly for sellers and for the market intermediary when compared with a single-price policy and acts as a coordination mechanism that facilitates the match between buyers and sellers.