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Banning Foreign Pharmacies from Sponsored Search: The Online Consumer Response

Author

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  • Matthew Chesnes

    (Federal Trade Commission, Washington, DC 20580)

  • Weijia (Daisy) Dai

    (Lehigh University, Bethlehem, Pennsylvania 18015)

  • Ginger Zhe Jin

    (Federal Trade Commission, Washington, DC 20580; University of Maryland, College Park, Maryland 20742)

Abstract

Increased competition from the Internet has raised concerns about the quality of prescription drugs sold online. Given the pressure from the Department of Justice, Google agreed to ban pharmacies not certified by the National Association of Boards of Pharmacy (NABP) from sponsored search listings. Using comScore click-through data originated from health-related queries, we study how the ban affects consumer search and click behavior in a difference-in-differences framework using the synthetic control method. We find that non-NABP-certified pharmacies received fewer clicks after the ban, and this effect is heterogeneous. In particular, pharmacies not certified by the NABP but certified by other sources (other-certified websites), experienced an increase in organic clicks that partially offset the loss in paid clicks after the ban. By contrast, pharmacies not certified by any certification agency experience much lower rates of substitution in organic clicks. These results suggest that the ban has increased the search cost for other-certified websites, but at least some consumers overcome the search cost by switching from sponsored to organic links. The lower substitution for uncertified websites may be explained by the rising consumer concerns about the quality of drugs sold on uncertified websites after the ban.

Suggested Citation

  • Matthew Chesnes & Weijia (Daisy) Dai & Ginger Zhe Jin, 2017. "Banning Foreign Pharmacies from Sponsored Search: The Online Consumer Response," Marketing Science, INFORMS, vol. 36(6), pages 879-907, November.
    • Handle: RePEc:inm:ormksc:v:36:y:2017:i:6:p:879-907
    DOI: 10.1287/mksc.2017.1058
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    Cited by:

    1. Chesnes, Matthew & Jin, Ginger Zhe, 2019. "Direct-to-consumer advertising and online search," Information Economics and Policy, Elsevier, vol. 46(C), pages 1-22.
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    3. Joan Calzada & Ricard Gil, 2020. "What Do News Aggregators Do? Evidence from Google News in Spain and Germany," Marketing Science, INFORMS, vol. 39(1), pages 134-167, January.
    4. Ziliang Deng & Peter W Liesch & Zeyu Wang, 2021. "Deceptive signaling on globalized digital platforms: Institutional hypnosis and firm internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(6), pages 1096-1120, August.
    5. Shuai Yang & Xinyu Chang & Sixing Chen & Shan Lin & William T. Ross, 2022. "Does music really work? The two-stage audiovisual cross-modal correspondence effect on consumers’ shopping behavior," Marketing Letters, Springer, vol. 33(2), pages 251-276, June.
    6. Thurman, Neil & Sly, James & Wilczek, Bartosz & Fletcher, Richard, 2022. "Forbidden fruit or soured grapes? Long-term effects of the temporary unavailability and rationing of US news websites on their consumption from the European Union," MPRA Paper 116909, University Library of Munich, Germany.
    7. Weijia Dai & Hyunjin Kim & Michael Luca, 2023. "Frontiers: Which Firms Gain from Digital Advertising? Evidence from a Field Experiment," Marketing Science, INFORMS, vol. 42(3), pages 429-439, May.

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