The Effects of Search Advertising on Competitors: An Experiment Before a Merger

Joseph Golden () and John Joseph Horton ()
Additional contact information
Joseph Golden: Collage.com, Brighton, Michigan 48116;
John Joseph Horton: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139; National Bureau of Economic Research (NBER), Cambridge Massachusetts 02138

Management Science, 2021, vol. 67, issue 1, 342-362

Abstract: We report the results of an experiment in which a company, Firm Vary, temporarily suspended its sponsored search advertising campaign on Google in randomly selected advertising markets in the United States. By shutting off its ads, Firm Vary lost customers, but only 63% as many as a nonexperimental estimate would have suggested. Following the experiment, Firm Vary merged with its closest competitor, Firm Fixed. Using combined data from both companies, the experiment revealed that spillover effects of Firm Vary’s search advertising on Firm Fixed’s business and its marketing campaigns were surprisingly small, even in the market for Firm Vary’s brand name as a keyword search term, where the two firms were effectively duopsonists.

Keywords: marketing: advertising and media; marketing: competitive strategy; economics: microeconomic behavior (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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