Do Organic Results Help or Hurt Sponsored Search Performance?

Ashish Agarwal (), Kartik Hosanagar () and Michael D. Smith ()
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Ashish Agarwal: McCombs School of Business, University of Texas, Austin, Texas 78712
Kartik Hosanagar: Operations, Information and Decisions, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104
Michael D. Smith: School of Information Systems and Management, Heinz College, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213

Information Systems Research, 2015, vol. 26, issue 4, 695-713

Abstract: We study the impact of changes in the competitors’ listings in organic search results on the performance of sponsored search advertisements. Using data from an online retailer’s keyword advertising campaign, we measure the impact of organic competition on both click-through rate and conversion rate of sponsored search advertisements. We find that an increase in organic competition leads to a decrease in the click performance of sponsored advertisements. However, organic competition helps the conversion performance of sponsored ads and leads to higher revenue. We also find that organic competition has a higher negative effect on click performance than does sponsored competition. Our results inform advertisers on how the presence of organic results influences the performance of their sponsored advertisements. Specifically, we show that organic competition acts as a substitute for clicks, but has a complementary effect on the conversion performance.

Keywords: sponsored search; organic search; ad placement; hierarchical Bayesian estimation; online advertising; online auctions; search engine marketing (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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