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Is it Always Best to be on Top? The Effect of Ad Positioning on Key Performance Indicators in Search Engine Advertising

Philipp Herrmann () and Michael Mueller ()
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Philipp Herrmann: University of Paderborn
Michael Mueller: MSO-Digital

No 9, Working Papers Dissertations from Paderborn University, Faculty of Business Administration and Economics

Abstract: Search Engine Advertising is one of the fastest growing instruments in online marketing and a major source of costs for online advertisers. In this research, we empirically and experimentally investigate the impact of ad positioning on key performance indicators in search engine advertising namely click-through-rates, cost-per-click, conversion-rates, and cost-per-conversion. We answer our research question by using a unique and very rich dataset provided by an online marketing agency as well as by conducting a field experiment on a major web search engine. Our analysis of the provided dataset shows that click-through-rates and cost-per-click are negatively correlated with the ad position i.e., the topmost ad position has higher click-through-rates and cost-per-click than, for example, positions two and three. In contrast, we do not find a significant negative correlation, and in the majority of cases no correlation, between ad positions and conversion-rates. Thus, due to the high cost-per-click for the top ad positions and the non-existent negative correlation between ad positions and conversion-rates, lower ad positions are also correlated with lower costs-per-conversion compared to the top positions. In particular, we find a decrease in the costs-per-conversion of approximately 40 percent if ads are not listed at the top position but, for example, on the less prominent position four. Validating these results, our field experiment shows a significant and substantial negative relationship between ad-position and click-through-rates, cost-per-click, and costs-per-conversion and no significant relationship between ad position and conversion-rates.

Keywords: Search Engine Advertising; Advertisement Position; Click-through-Rates; Conversion-Rates; Cost-per-Click; Cost-per-Conversion; Field Experiment (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp
Date: 2014-08
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