Google Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT) are offering companies to buy words as an options to make its websites standout when a person searches for a particular a term. A study conducted that by eBay Inc (NASDAQ:EBAY) found that paying for keywords on search engine to advertise a company’s website has little effect on its sales.
The report from BBC News cited a statement from the auction website that people who clicked from the result of the paid search service were loyal customers who intends to visit the websites they are looking for.
The spokesperson from eBay Inc (NASDAQ:EBAY) emphasized, "Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels."
eBay Inc (NASDAQ:EBAY) revealed the result of its study during an economics conference at the Stanford University. The company removed its brand keywords from the platforms of MSN and Yahoo! Inc. (NASDAQ:YHOO). eBay retained its brand keywords on Google Inc (NASDAQ:GOOG)'s platform as control in the experiment, which was conducted in March 2012.
As a result, users still click on the websites they are looking for as they appear on the search engine. According to the report of Thomas Blake, Chris Nosko and Steve Tadelis of eBay, the removal of the advertisements simply increased the prominence of eBay in natural search result.
Based on their experiment, there is no short-term value in brand advertising. According to them, "shutting paid search advertisements closed one (costly) path to a firm's website but diverted traffic to the next easiest path (natural search), which is free to the advertiser."
Blake, Nosko, and Tadelis added, “We confirm this result further using a geography-based experiment on Google’s search platform in Europe. Halting brand keyword advertising also resulted in no detectable drop in traffic and sales.”
According to the spokesperson from eBay said, "Since outcomes differ so much among advertisers and are influenced by many different factors, we encourage advertisers to experiment with their own campaigns."
The auction website did not indicate any decision to change its plans regarding its spending on search engine advertising.
Dr. Philip Alford, director of the digital hub in the School of Tourism at Bournemouth University pointed out to BBC News the effectiveness of paid searches varies on the popularity of a brand name. According to him, eBay is a household brand name and it has already a highly engaged user base.
Alford explained that Google ad words is beneficial for smaller organizations because their websites are not yet sufficiently indexed by the search engine giant, therefore they struggle in natural searches for terms. He said, "The more click your ad gets, you get rewarded over time with a higher listing as you are perceived by Google Inc (NASDAQ:GOOG) as being relevant. But it is interesting that a lot of people still are paying for terms that actually appear quite high up the listings in the search results anyway."