IDEAS home Printed from https://ideas.repec.org/a/eee/joinma/v26y2012i3p141-154.html
   My bibliography  Save this article

Return on Quality Improvements in Search Engine Marketing

Author

Listed:
  • Abou Nabout, Nadia
  • Skiera, Bernd

Abstract

In search engine marketing, such as on Google, advertisements' ranking and prices paid per click result from generalized, second-price, sealed bid auctions that weight the submitted bids for each keyword by the quality of an advertisement. Conventional wisdom suggests that advertisers can only benefit from improving their advertisement's quality. With an empirical study, this article shows that quality improvements have complex effects whose returns are actually unclear: 5% of all quality improvements to an advertisement lead to higher prices (measured by price per click) per keyword, 100% to a higher number of clicks, 53% to higher costs for search engine marketing, and 37% to lower profits. Quality improvements lead to higher weighted bids, which only lower prices if they do not improve the ranking of the advertisement. Otherwise, better ranks likely lead to higher prices. A decomposition method can disentangle these effects and explain their effects on search engine marketing costs and profits. Finally, the results indicate that advertisers benefit if they lower their bids after improvements to advertising quality.

Suggested Citation

  • Abou Nabout, Nadia & Skiera, Bernd, 2012. "Return on Quality Improvements in Search Engine Marketing," Journal of Interactive Marketing, Elsevier, vol. 26(3), pages 141-154.
  • Handle: RePEc:eee:joinma:v:26:y:2012:i:3:p:141-154
    DOI: 10.1016/j.intmar.2011.11.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1094996811000764
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.intmar.2011.11.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. De Liu & Jianqing Chen & Andrew B. Whinston, 2010. "Ex Ante Information and the Design of Keyword Auctions," Information Systems Research, INFORMS, vol. 21(1), pages 133-153, March.
    2. Juan Feng, 2008. "—Optimal Mechanism for Selling a Set of Commonly Ranked Objects," Marketing Science, INFORMS, vol. 27(3), pages 501-512, 05-06.
    3. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
    4. Randolph E. Bucklin, 2008. "Marketing Models for Electronic Commerce," International Series in Operations Research & Management Science, in: Berend Wierenga (ed.), Handbook of Marketing Decision Models, chapter 0, pages 327-369, Springer.
    5. Oliver J. Rutz & Michael Trusov & Randolph E. Bucklin, 2011. "Modeling Indirect Effects of Paid Search Advertising: Which Keywords Lead to More Future Visits?," Marketing Science, INFORMS, vol. 30(4), pages 646-665, July.
    6. Hal R. Varian, 2010. "Computer Mediated Transactions," American Economic Review, American Economic Association, vol. 100(2), pages 1-10, May.
    7. Juan Feng & Hemant K. Bhargava & David M. Pennock, 2007. "Implementing Sponsored Search in Web Search Engines: Computational Evaluation of Alternative Mechanisms," INFORMS Journal on Computing, INFORMS, vol. 19(1), pages 137-148, February.
    8. Rangaswamy, Arvind & Giles, C. Lee & Seres, Silvija, 2009. "A Strategic Perspective on Search Engines: Thought Candies for Practitioners and Researchers," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 49-60.
    9. Avi Goldfarb & Catherine Tucker, 2011. "Search Engine Advertising: Channel Substitution When Pricing Ads to Context," Management Science, INFORMS, vol. 57(3), pages 458-470, March.
    10. Song Yao & Carl F. Mela, 2011. "A Dynamic Model of Sponsored Search Advertising," Marketing Science, INFORMS, vol. 30(3), pages 447-468, 05-06.
    11. Anindya Ghose & Sha Yang, 2009. "An Empirical Analysis of Search Engine Advertising: Sponsored Search in Electronic Markets," Management Science, INFORMS, vol. 55(10), pages 1605-1622, October.
    12. Sha Yang & Anindya Ghose, 2010. "Analyzing the Relationship Between Organic and Sponsored Search Advertising: Positive, Negative, or Zero Interdependence?," Marketing Science, INFORMS, vol. 29(4), pages 602-623, 07-08.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joo, Mingyu & Wilbur, Kenneth C. & Zhu, Yi, 2016. "Effects of TV advertising on keyword search," International Journal of Research in Marketing, Elsevier, vol. 33(3), pages 508-523.
    2. Francesco Decarolis & Maris Goldmanis & Antonio Penta & Ksenia Shakhgildyan, 2023. "Bid Coordination in Sponsored Search Auctions: Detection Methodology and Empirical Analysis," Journal of Industrial Economics, Wiley Blackwell, vol. 71(2), pages 570-592, June.
    3. Patrick Winter & Paul Alpar, 2020. "Effects of search engine advertising on user clicks, conversions, and basket choice," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(4), pages 837-862, December.
    4. Klapdor, Sebastian & Anderl, Eva M. & von Wangenheim, Florian & Schumann, Jan H., 2014. "Finding the Right Words: The Influence of Keyword Characteristics on Performance of Paid Search Campaigns," Journal of Interactive Marketing, Elsevier, vol. 28(4), pages 285-301.
    5. Abou Nabout, Nadia & Lilienthal, Markus & Skiera, Bernd, 2014. "Empirical Generalizations in Search Engine Advertising," Journal of Retailing, Elsevier, vol. 90(2), pages 206-216.
    6. Bernd Skiera & Nadia Abou Nabout, 2013. "Practice Prize Paper ---PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising," Marketing Science, INFORMS, vol. 32(2), pages 213-220, March.
    7. Aswani, Reema & Kar, Arpan Kumar & Ilavarasan, P. Vigneswara & Dwivedi, Yogesh K., 2018. "Search engine marketing is not all gold: Insights from Twitter and SEOClerks," International Journal of Information Management, Elsevier, vol. 38(1), pages 107-116.
    8. Juan José López García & David Lizcano & Celia MQ Ramos & Nelson Matos, 2019. "Digital Marketing Actions That Achieve a Better Attraction and Loyalty of Users: An Analytical Study," Future Internet, MDPI, vol. 11(6), pages 1-16, June.
    9. José Ramón Saura & Pedro Palos-Sánchez & Luis Manuel Cerdá Suárez, 2017. "Understanding the Digital Marketing Environment with KPIs and Web Analytics," Future Internet, MDPI, vol. 9(4), pages 1-13, November.
    10. Ganesh Dash & Debarun Chakraborty, 2021. "Digital Transformation of Marketing Strategies during a Pandemic: Evidence from an Emerging Economy during COVID-19," Sustainability, MDPI, vol. 13(12), pages 1-19, June.
    11. Yang, Yupin & Lu, Qiang (Steven) & Tang, Guanting & Pei, Jian, 2015. "The Impact of Market Competition on Search Advertising," Journal of Interactive Marketing, Elsevier, vol. 30(C), pages 46-55.
    12. Chalil, Tengku Munawar & Dahana, Wirawan Dony & Baumann, Chris, 2020. "How do search ads induce and accelerate conversion? The moderating role of transaction experience and organizational type," Journal of Business Research, Elsevier, vol. 116(C), pages 324-336.
    13. Nagpal, Mayank & Petersen, J. Andrew, 2021. "Keyword Selection Strategies in Search Engine Optimization: How Relevant is Relevance?," Journal of Retailing, Elsevier, vol. 97(4), pages 746-763.
    14. Belanche, Daniel & Flavián, Carlos & Pérez-Rueda, Alfredo, 2017. "Understanding Interactive Online Advertising: Congruence and Product Involvement in Highly and Lowly Arousing, Skippable Video Ads," Journal of Interactive Marketing, Elsevier, vol. 37(C), pages 75-88.
    15. Sirdeshmukh, Deepak & Ahmad, Norita B. & Khan, M. Sajid & Ashill, Nicholas J., 2018. "Drivers of user loyalty intention and commitment to a search engine: An exploratory study," Journal of Retailing and Consumer Services, Elsevier, vol. 44(C), pages 71-81.
    16. Park, Chang Hee & Agarwal, Manoj K., 2018. "The order effect of advertisers on consumer search behavior in sponsored search markets," Journal of Business Research, Elsevier, vol. 84(C), pages 24-33.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kinshuk Jerath & Liye Ma & Young-Hoon Park & Kannan Srinivasan, 2011. "A "Position Paradox" in Sponsored Search Auctions," Marketing Science, INFORMS, vol. 30(4), pages 612-627, July.
    2. Carsten D. Schultz, 2020. "The impact of ad positioning in search engine advertising: a multifaceted decision problem," Electronic Commerce Research, Springer, vol. 20(4), pages 945-968, December.
    3. Bernd Skiera & Nadia Abou Nabout, 2013. "Practice Prize Paper ---PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising," Marketing Science, INFORMS, vol. 32(2), pages 213-220, March.
    4. Xiaoquan (Michael) Zhang & Juan Feng, 2011. "Cyclical Bid Adjustments in Search-Engine Advertising," Management Science, INFORMS, vol. 57(9), pages 1703-1719, February.
    5. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    6. Sha Yang & Shijie Lu & Xianghua Lu, 2014. "Modeling Competition and Its Impact on Paid-Search Advertising," Marketing Science, INFORMS, vol. 33(1), pages 134-153, January.
    7. Shengqi Ye & Goker Aydin & Shanshan Hu, 2015. "Sponsored Search Marketing: Dynamic Pricing and Advertising for an Online Retailer," Management Science, INFORMS, vol. 61(6), pages 1255-1274, June.
    8. Klapdor, Sebastian & Anderl, Eva M. & von Wangenheim, Florian & Schumann, Jan H., 2014. "Finding the Right Words: The Influence of Keyword Characteristics on Performance of Paid Search Campaigns," Journal of Interactive Marketing, Elsevier, vol. 28(4), pages 285-301.
    9. Xiaomeng Du & Meng Su & Xiaoquan (Michael) Zhang & Xiaona Zheng, 2017. "Bidding for Multiple Keywords in Sponsored Search Advertising: Keyword Categories and Match Types," Information Systems Research, INFORMS, vol. 28(4), pages 711-722, December.
    10. Anoek Castelein & Dennis Fok & Richard Paap, 2019. "Dynamics in clickthrough and conversion probabilities of paid search advertisements," Tinbergen Institute Discussion Papers 19-056/III, Tinbergen Institute.
    11. Andrey Simonov & Shawndra Hill, 2021. "Competitive Advertising on Brand Search: Traffic Stealing and Click Quality," Marketing Science, INFORMS, vol. 40(5), pages 923-945, September.
    12. Vibhanshu Abhishek & Kartik Hosanagar, 2013. "Optimal Bidding in Multi-Item Multislot Sponsored Search Auctions," Operations Research, INFORMS, vol. 61(4), pages 855-873, August.
    13. Abou Nabout, Nadia & Skiera, Bernd & Stepanchuk, Tanja & Gerstmeier, Eva, 2012. "An analysis of the profitability of fee-based compensation plans for search engine marketing," International Journal of Research in Marketing, Elsevier, vol. 29(1), pages 68-80.
    14. Joseph Golden & John Joseph Horton, 2021. "The Effects of Search Advertising on Competitors: An Experiment Before a Merger," Management Science, INFORMS, vol. 67(1), pages 342-362, January.
    15. Yang, Yupin & Lu, Qiang (Steven) & Tang, Guanting & Pei, Jian, 2015. "The Impact of Market Competition on Search Advertising," Journal of Interactive Marketing, Elsevier, vol. 30(C), pages 46-55.
    16. Navdeep Sahni, 2015. "Effect of temporal spacing between advertising exposures: Evidence from online field experiments," Quantitative Marketing and Economics (QME), Springer, vol. 13(3), pages 203-247, September.
    17. Darius Schlangenotto & Martin Poniatowski & Dennis Kundisch, 2018. "What Drives Paid Search Success: A Systematic Literature Review," Working Papers Dissertations 31, Paderborn University, Faculty of Business Administration and Economics.
    18. Mengzhou Zhuang & Eric (Er) Fang & Jongkuk Lee & Xiaoling Li, 2021. "The Effects of Price Rank on Clicks and Conversions in Product List Advertising on Online Retail Platforms," Information Systems Research, INFORMS, vol. 32(4), pages 1412-1430, December.
    19. Vibhanshu Abhishek & Kartik Hosanagar & Peter S. Fader, 2015. "Aggregation Bias in Sponsored Search Data: The Curse and the Cure," Marketing Science, INFORMS, vol. 34(1), pages 59-77, January.
    20. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joinma:v:26:y:2012:i:3:p:141-154. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-interactive-marketing/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.