Higher Precision Is Not Always Better: Search Algorithm and Consumer Engagement

On decentralized e-commerce platforms, search algorithms play a critical role in matching buyers and sellers. A typical search algorithm routinely refines and improves its catalog of data to increase search precision, but the effects of a more precise search are little known. We evaluate such effects via a 2019 quasiexperiment on a world-leading e-commerce platform in which the search algorithm refined some product categories into finer subgroups to allocate consumer queries to more relevant product listings. Our data cover millions of consumers’ search and purchase behaviors over six months across multiple search sessions and product categories, enabling us to investigate trade-offs over time and across categories. We find that a more precise search algorithm improves consumers’ click-through and purchase rates drastically and instantaneously, but it comes at the cost of a significant decrease in consumer engagement and unplanned purchases over a longer time horizon. On average, consumers who used to spend more time searching now conduct 5.5% fewer searches, spend 4.1% less time on the platform, and decrease their spending on related categories by 2.2% in the week after the search precision increases. Our examination of the mechanisms behind these consequences calls for more careful search algorithm designs that account for not only instant conversion based on search precision but also consumer engagement and sellers’ strategic responses in the longer horizon.