IDEAS home Printed from https://ideas.repec.org/a/eee/joinma/v30y2015icp46-55.html
   My bibliography  Save this article

The Impact of Market Competition on Search Advertising

Author

Listed:
  • Yang, Yupin
  • Lu, Qiang (Steven)
  • Tang, Guanting
  • Pei, Jian

Abstract

Although search advertising has gained popularity in recent years, research on the content of search advertising is scarce. This study develops a conceptual framework to understand how market competition affects what a firm advertises in its search ads. Search advertisements from two industries (i.e., hotel and car industries) are used to test hypotheses developed from the conceptual framework. The findings indicate that in a highly competitive market (1) firms engage in more price advertising in their search ads and (2) intermediaries are more likely to increase price advertising in their search ads than brand suppliers. More interestingly, competition from intermediaries and brand suppliers has different effects on the content of search advertising by intermediaries and brand suppliers. These findings enhance the understanding of firms' behaviors in determining their search advertising content based on the intensity of market competition.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:joinma:v:30:y:2015:i:c:p:46-55
    DOI: 10.1016/j.intmar.2015.01.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1094996815000031
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intmar.2015.01.002?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. Dina Mayzlin & Jiwoong Shin, 2011. "Uninformative Advertising as an Invitation to Search," Marketing Science, INFORMS, vol. 30(4), pages 666-685, July.
    2. Nils-Henrik M. von der Fehr & Kristin Stevik, 1998. "Persuasive Advertising and Product Differentiation," Southern Economic Journal, John Wiley & Sons, vol. 65(1), pages 113-126, July.
    3. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
    4. Stigler, George J., 2011. "Economics of Information," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 5, pages 35-49.
    5. Gene M. Grossman & Carl Shapiro, 1984. "Informative Advertising with Differentiated Products," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 63-81.
    6. 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.
    7. 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.
    8. Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
    9. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    10. Esther Gal‐Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, September.
    11. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    12. Vasant Dhar & Anindya Ghose, 2010. "Research Commentary ---Sponsored Search and Market Efficiency," Information Systems Research, INFORMS, vol. 21(4), pages 760-772, December.
    13. Marc Rysman, 2004. "Competition Between Networks: A Study of the Market for Yellow Pages," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 483-512.
    14. Julian Wright, 2002. "Access Pricing under Competition: An Application to Cellular Networks," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 289-315, September.
    15. Pradeep Bhardwaj & Yuxin Chen & David Godes, 2008. "Buyer-Initiated vs. Seller-Initiated Information Revelation," Management Science, INFORMS, vol. 54(6), pages 1104-1114, June.
    16. 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.
    17. Michael R. Baye & John Morgan, 2009. "Brand and Price Advertising in Online Markets," Management Science, INFORMS, vol. 55(7), pages 1139-1151, July.
    18. Hans Haans & Néomie Raassens & Roel Hout, 2013. "Search engine advertisements: The impact of advertising statements on click-through and conversion rates," Marketing Letters, Springer, vol. 24(2), pages 151-163, June.
    19. Barbara Mueller, 1991. "An Analysis of Information Content in Standardized vs. Specialized Multinational Advertisements," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(1), pages 23-39, March.
    20. Maarten C. W. Janssen & Marielle C. Non, 2009. "Going Where the Ad Leads You: On High Advertised Prices and Searching Where to Buy," Marketing Science, INFORMS, vol. 28(1), pages 87-98, 01-02.
    21. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    22. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    23. 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.
    24. Mark Armstrong & Robert Porter (ed.), 2007. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 3, number 1.
    25. Linli Xu & Kenneth C. Wilbur & S. Siddarth & Jorge M. Silva-Risso, 2014. "Price Advertising by Manufacturers and Dealers," Management Science, INFORMS, vol. 60(11), pages 2816-2834, November.
    26. Andrei Hagiu & Bruno Jullien, 2011. "Why do intermediaries divert search?," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 337-362, June.
    27. David Godes & Elie Ofek & Miklos Sarvary, 2009. "Content vs. Advertising: The Impact of Competition on Media Firm Strategy," Marketing Science, INFORMS, vol. 28(1), pages 20-35, 01-02.
    28. Song Yao & Carl F. Mela, 2011. "A Dynamic Model of Sponsored Search Advertising," Marketing Science, INFORMS, vol. 30(3), pages 447-468, 05-06.
    29. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 465-491.
    30. Oliver J. Rutz & Michael Trusov, 2011. "Zooming In on Paid Search Ads--A Consumer-Level Model Calibrated on Aggregated Data," Marketing Science, INFORMS, vol. 30(5), pages 789-800, September.
    31. 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.
    32. 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.
    33. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 28, pages 1701-1844, Elsevier.
    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. Erdmann, Anett & Arilla, Ramón & Ponzoa, José M., 2022. "Search engine optimization: The long-term strategy of keyword choice," Journal of Business Research, Elsevier, vol. 144(C), pages 650-662.
    2. Jian Pei, 2020. "A Survey on Data Pricing: from Economics to Data Science," Papers 2009.04462, arXiv.org, revised Nov 2020.
    3. Rex Yuxing Du & Mingyu Joo & Kenneth C. Wilbur, 2019. "Advertising and brand attitudes: Evidence from 575 brands over five years," Quantitative Marketing and Economics (QME), Springer, vol. 17(3), pages 257-323, September.
    4. Rex Yuxing Du & Mingyu Joo & Kenneth C. Wilbur, 2018. "Advertising and Brand Attitudes: Evidence from 575 Brands over Five Years," Papers 1810.07783, arXiv.org.
    5. Nyamwanza L. & Madzivire E. & Madzivire E., 2020. "Impact of Management Accounting on Decision Making: A Zimbabwean Perspective," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 8(3), pages 133-145.
    6. Nyamwanza L. & Madzivire E. & Madzivire E., 2020. "Impact of Management Accounting on Decision Making: A Zimbabwean Perspective," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 9(1), pages 37-49.

    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. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, in: V.A. Ginsburgh & D. Throsby (ed.), Handbook of the Economics of Art and Culture, edition 1, volume 1, chapter 18, pages 567-614, Elsevier.
    2. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    3. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.
    4. Simon P. Anderson, 2005. "Regulation of Television advertising," Virginia Economics Online Papers 363, University of Virginia, Department of Economics.
    5. Dina Mayzlin & Jiwoong Shin, 2011. "Uninformative Advertising as an Invitation to Search," Marketing Science, INFORMS, vol. 30(4), pages 666-685, July.
    6. Laurent Cavenaile & Pau Roldan-Blanco, 2021. "Advertising, Innovation, and Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(3), pages 251-303, July.
    7. Salvatore Piccolo & Piero Tedeschi & Giovanni Ursino, 2018. "Deceptive Advertising with Rational Buyers," Management Science, INFORMS, vol. 64(3), pages 1291-1310, March.
    8. Wang, Shinn-Shyr & Stiegert, Kyle W., 2006. "The Duopolistic Firm with Endogenous Risk Control: Case of Persuasive Advertising and Product Differentiation," Staff Paper Series 496, University of Wisconsin, Agricultural and Applied Economics.
    9. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    10. Simon P. Anderson & Régis Renault, 2013. "The Advertising Mix for a Search Good," Management Science, INFORMS, vol. 59(1), pages 69-83, April.
    11. Ulrich Doraszelski & Sarit Markovich, 2004. "Advertising Dynamics and Competitive Advantage," Computing in Economics and Finance 2004 61, Society for Computational Economics.
    12. Dokyun Lee & Kartik Hosanagar & Harikesh S. Nair, 2018. "Advertising Content and Consumer Engagement on Social Media: Evidence from Facebook," Management Science, INFORMS, vol. 64(11), pages 5105-5131, November.
    13. Guofang Huang & Matthew Shum & Wei Tan, 2019. "Is pharmaceutical detailing informative? Evidence from contraindicated drug prescriptions," Quantitative Marketing and Economics (QME), Springer, vol. 17(2), pages 135-160, June.
    14. 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.
    15. Simon P. Anderson & Régis Renault, 2006. "Advertising Content," American Economic Review, American Economic Association, vol. 96(1), pages 93-113, March.
    16. Yuxin Chen & Qihong Liu, 2022. "Signaling Through Advertising When an Ad Can Be Blocked," Marketing Science, INFORMS, vol. 41(1), pages 166-187, January.
    17. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    18. Soberman, David A. & Xiang, Yi, 2022. "Designing the content of advertising in a differentiated market," International Journal of Research in Marketing, Elsevier, vol. 39(1), pages 190-211.
    19. Blasco, Andrea & Sobbrio, Francesco, 2012. "Competition and commercial media bias," Telecommunications Policy, Elsevier, vol. 36(5), pages 434-447.
    20. 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.

    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:30:y:2015:i:c:p:46-55. 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.