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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

Author

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  • Philipp Herrmann

    (University of Paderborn)

  • Michael Mueller

    (MSO-Digital)

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.

Suggested Citation

  • Philipp Herrmann & Michael Mueller, 2014. "Is it Always Best to be on Top? The Effect of Ad Positioning on Key Performance Indicators in Search Engine Advertising," Working Papers Dissertations 09, Paderborn University, Faculty of Business Administration and Economics.
    • Handle: RePEc:pdn:dispap:09
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    References listed on IDEAS

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    More about this item

    Keywords

    Search Engine Advertising; Advertisement Position; Click-through-Rates; Conversion-Rates; Cost-per-Click; Cost-per-Conversion; Field Experiment;
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