On the optimal number of advertising slots in a generalized second-price auction

In search advertising, a search engine uses a generalized second-price auction to sell advertising slots adjacent to search results on its webpage. In this paper, we study an interesting question related to the design of the generalized second-price auction: how should a search engine strategically decide on the number of advertising slots? To answer this question, we analyze the implication of varying the number of slots in a base model in which the click-through rates are assumed to be independent of the number of slots. When deciding the number of slots, we find that a search engine’s profit is based on two counteracting factors: the incremental clicks from an extra slot and the influence of the extra slot on advertisers’ payments per click. Our analysis characterizes the conditions for optimality of the number of slots and the implications of different distributions for advertiser valuations. We also extend the base model to allow for attraction and cannibalization of clicks from existing slots by new ad slots and show how such effects affect the optimal number of slots. Our overall results show that search engines need to optimize the number of ad slots offered for auction in order to maximize profit.     

Unraveling the Personalization Paradox: The Effect of Information Collection and Trust-Building Strategies on Online Advertisement Effectiveness

Retailers gather data about customers’ online behavior to develop personalized service offers. Greater personalization typically increases service relevance and customer adoption, but paradoxically, it also may increase customers’ sense of vulnerability and lower adoption rates. To demonstrate this contradiction, an exploratory field study on Facebook and secondary data about a personalized advertising campaign indicate sharp drops in click-through rates when customers realize their personal information has been collected without their consent. To investigate the personalization paradox, this study uses three experiments that confirm a firm's strategy for collecting information from social media websites is a crucial determinant of how customers react to online personalized advertising. When firms engage in overt information collection, participants exhibit greater click-through intentions in response to more personalized advertisements, in contrast with their reactions when firms collect information covertly. This effect reflects the feelings of vulnerability that consumers experience when firms undertake covert information collection strategies. Trust-building marketing strategies that transfer trust from another website or signal trust with informational cues can offset this negative effect. These studies help unravel the personalization paradox by explicating the role of information collection and its impact on vulnerability and click-through rates.     

Cross channel effects of search engine advertising on brick & mortar retail sales: Meta analysis of large scale field experiments on Google.com

We investigate the cross channel effects of search engine advertising on Google.com on sales in brick and mortar retail stores. Obtaining causal and actionable estimates in this context is challenging: Brick and mortar store sales vary widely on a weekly basis; offline media dominate the marketing budget; search advertising and demand are contemporaneously correlated; and estimates have to be credible to overcome agency issues between the online and offline marketing groups. We report on a meta-analysis of a population of 15 independent field experiments, in which 13 well-known U.S. multi-channel retailers spent over $4 Million in incremental search advertising. In test markets category keywords were maintained in positions 1-3 for 76 product categories with no search advertising on these keywords in the control markets. Outcomes measured include sales in the advertised categories, total store sales and Return on Ad Spending. We estimate the average effect of each outcome for this population of experiments using a Hierarchical Bayesian (HB) model. The estimates from the HB model provide causal evidence that increasing search engine advertising on broad keywords on Google.com had a positive effect on sales in brick and mortar stores for the advertised categories for this population of retailers. There also was a positive effect on total store sales. Hence the increase in sales in the advertised categories was incremental to the retailer net of any sales borrowed from non-advertised categories. The total store sales increase was a meaningful improvement compared to the baseline sales growth rates. The average Return on Ad Spend (ROAS) is positive, but does not breakeven on average although several retailers achieved or exceeded break-even based only on brick and mortar sales. We examine the robustness of our findings to alternative assumptions about the data specific to this set of experiments. Our estimates suggest online and offline are linked markets, that media planners should account for the offline effects in the planning and execution of search advertising campaigns, and that these effects should be adjusted by category and retailer. Extensive replication and a unique research protocol ensure that our results are general and credible.     

Internet advertising effectiveness

Online advertising has experienced phenomenal growth since its inception in 1994. This empirical study investigates the impact of seven creative characteristics of banner ads on the effectiveness of online advertising using a multiple regression model. A random sample of 209 banner ads was drawn from a sampling frame of advertisers, provided by an advertising agency specialising in internet advertising for the gaming industry. The findings of this study are broadly consistent with past research into online advertising efficiency, indicating that the creative characteristics of effective banner ads in the online gaming arena include: a larger size, absence of promotional incentives and the presence of information about casino games. In contrast, banner features such as animation, action phrase and presence of company brand or logo were ineffective in generating clickthroughs. Contrary to expectations, long messages on banners were associated with higher click-through rates.     

Return on Quality Improvements in Search Engine Marketing

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.     

Finding the Right Words: The Influence of Keyword Characteristics on Performance of Paid Search Campaigns

Despite its importance for both e-commerce and traditional offline vendors, managing paid search campaigns is often based on trial and error. In particular, neither research nor practice has extensively addressed identifying relevant keywords and setting appropriate matching options. The authors develop a model based on a keyword's intrinsic and extrinsic information content to shed light on how keyword characteristics affect campaign performance. Intrinsic information includes linguistic aspects and user- and content-related features, which can be indirectly changed through extrinsic information such as matching options. Using an advertiser-level data set from multiple industries, this study evaluates the impact of these criteria on click-through and conversion rates. The authors find that the query variation index, which measures whether a keyword contains sufficient information to identify a user's information need correctly, is an effective predictor of keyword performance. Moreover, they show that the relationship between two of the main predictors, namely, query variation and advertiser names, and a keyword's performance is moderated by the advertiser's choice of matching options.     

中小企业实施搜索引擎营销策略分析

搜索引擎是中小企业的一种有效网络营销手段。目前比较吸引企业的搜索引擎营销模式主要有搜索引擎竞价排名、关键词广告、搜索引擎优化等。中小企业搜索引擎营销策略包括基于搜索引擎的网站优化策略、基于搜索引擎的网站推广策略、基于搜索引擎的广告投放策略、基于搜索引擎的信息收集策略．以及这些策略综合形成的组合。随着搜索引擎市场规模不断扩大并稳步发展,我国搜索引擎用户数量快速增长,用户对搜索引擎高度认可并广泛使用,搜索引擎营销的前景广阔。     

Branding Potentials of Keyword Search Ads: The Effects of Ad Rankings on Brand Recognition and Evaluations

From the long-term branding perspective, this study examined the effects of ad rankings in search engine result pages on memory and evaluations, particularly for unknown brands. Subjects’ topic knowledge (TK) and persuasion knowledge (PK) about keyword search ads were examined as moderators. Holding click-through rates constant, the results of an experiment, in general, suggest that top-ranked keyword search ads for the unknown brand may generate greater recognition and more favorable brand evaluations along the primed attribute than ones ranked lower than well-known brands. Online users’ TK and PK about keyword search ads are working together to enhance or attenuate such ranking effects on brand recognition and evaluations. Theoretical and practical implications of these findings are discussed.     

WHY DO PEOPLE AVOID ADVERTISING ON THE INTERNET?

This study was designed to provide insights into why people avoid advertising on the Internet. Recent negative trends in Internet advertising, such as "banner blindness" and extremely low click-through rates, make it imperative to study various factors affecting Internet ad avoidance. Accordingly, this study builds a comprehensive theoretical model explaining advertising avoidance on the Internet. We examined three latent variables of Internet ad avoidance: perceived goal impediment, perceived ad clutter, and prior negative experience. We found that these constructs successfully explain why people cognitively, affectively, and behaviorally avoid advertising messages on the Internet. Perceived goal impediment is found to be the most significant antecedent explaining advertising avoidance on the Internet.     

Paid search: The innovation that changed the Web

Search engines are key to the operation of the World Wide Web. This centrality, however, presents challenges: search engine providers face the problem of revenue generation when users expect free content, while advertisers need to attract the interest of searchers. The innovation that effectively addresses these challenges is the use of text advertisements based upon search topic, known as paid search. The method entails advertisers competing for top listing position through bidding in ongoing auctions and then paying when users click on their advertisements, making paid search a flexible and accountable form of advertising. Since its introduction in 1998, paid search has become the dominant form of online advertising and led to Google's $140 billion market capitalization in 2006. This article analyzes the emergence of paid search and the mechanics of its operation, and offers managers guidance on its effective usage.     

Maximizing User Interactivity through Banner Ad Design

This research developed criteria for an online banner ad design to maximize user interactivity. The ad's design criteria were based on studies on interactivity, animation, persuasiveness of emotional and rational appeals in ads, animation, ad placement, size, and metrics. The ad was deployed and measured for effectiveness by using behavioral response metrics: click-through rates and mouse rollovers. Findings show that the ad designed according to the criteria garnered more user interaction than the other ads deployed during the same time. This has value for advertisers that need to evaluate online banner advertising design and need to make informed decisions on advertising strategy and campaigns.     

Empirical Generalizations in Search Engine Advertising

This article compares prices per click and search engine advertising (SEA) effectiveness across six countries and 15 industries over four years. We find that prices per click are highest in the United States and United Kingdom, as well as in the financial and Internet services industries, but are lower in retail than in services industries. In highly competitive markets, increases in SEA expenditures may increase prices per click that do not necessarily lead to higher advertising effectiveness, here measured as a higher number of clicks. To analyze and compare advertising effectiveness across industries, we decompose the effect of increases in SEA expenditures on prices per click (price effect) and number of clicks (quantity effect). A cross-country, cross-industry study shows that 44 percent of the increase in SEA expenditures is associated with more clicks and 56 percent with higher prices.     

Variations in the contractual terms of cooperative advertising contracts: An empirical investigation

Cooperative advertising arrangements between manufacturers and resellers contain two principal components in their payment schedules: a participation rate and an accrual rate. We analyze 2,156 cooperative advertising plans to see how they vary across consumer and industrial products, as well as between convenience and nonconvenience consumer products. We also study how participation and accrual rates vary by the level of manufacturer concentration across product categories. We find that both participation and accrual rates are higher for consumer products than for industrial products and within consumer products are higher for convenience products than for nonconvenience products. We find mixed results for the effect of manufacturer concentration on these rates. We discuss how these results are consistent with existing perspectives on cooperative advertising.     

About the authors

Calls for the banning of tobacco advertising rely heavily on the belief that advertising contributes towards children starting or continuing the habit. A number of research studies which claim to demonstrate this connection have been reviewed. Some of these studies have been extensively quoted in anti-smoking literature. This paper is based on a detailed review.

The review found that the studies tended to show a degree of correlation between awareness/approval of advertising and propensity to smoke, but failed to establish a causal link, relying instead on emotive language to convey the impression of cause and effect. From evidence quoted in the studies themselves, it can be demonstrated that, even if advertising can lead children to smoke (which can neither be proved nor disproved), it is likely to be an influence of only minor importance, and much less relevant than other factors such as family environment and peer pressure.

There is no evidence in any of the studies to suggest that, if advertising were banned, it would make the least difference to the propensity of children to smoke. The major weakness of the studies reviewed is that they pay virtually no attention to the more important question of what, in fact, motivates the minority of children who start to smoke. It is hard to resist the conclusion that advertising is selected for attack mainly because it is a relatively easy target.     

Search Engine Optimization and Pay-per-Click Marketing Strategies

Any e-commerce venture using a website as the main shop front should invest in marketing its website. In this study, the relationship between website owners having invested in search engine optimization (SEO) and pay-per-click (PPC), respectively, is investigated. The design used in this research involves an empirical field experimental approach in which implementation of both SEO and PPC are considered, with subsequent comparison of results. Data were gathered from Google search results after performing both Fat Head and Long Tail key-phrase searches based in various categories. Websites that were listed among the top 10 in the sponsored section of search results were recorded. These websites were then checked to see if they also had an SEO ranking within the top 100 for both the Fat Head and Long Tail key-phrases. It is found that website owners seldom invest in SEO as part of a search engine marketing (SEM) campaign. This seems to confirm some of the findings by other authors. This research has important implications for SEO and PPC practitioners, and for website owners. It should influence the way budgets on search engine marketing are applied. Finally, it could be used by marketing managers in better utilizing their limited SEM dollars. No evidence could be found that this kind of empirical research has been done, hence the results are considered to be unique.     

Thinking and feeling on the World Wide Web: the impact of product type and time on World Wide Web advertising effectiveness

This article focuses on the effectiveness of banner advertisements.Drawing from theory on functional versus expressive products and wear in versus wear out it argues that product type and time are important factors in World Wide Web (WWW) advertising. The results from a large empirical study are reported and show that responses to banner advertisements differ between functional and expressive products and over time. Functional product banner advertisements have higher initial click-throughs that quickly deteriorate and they have no effect through advertisement impressions. Expressive products need time to wear in as both click-through rates and positive brand attitudes from advertisement impressions increase with repeated exposures. These differences in consumer response are conceptualized as thinking and feeling on the WWW,thereby providing important implications for advertisers.     

Communion-over-Agency Effects on Advertising Effectiveness

Gender-stereotypical portrayals of communal women and agentic men are highly common in advertising. But past research indicates that advertising effectiveness is higher when endorsers are portrayed as communal – irrespective of their gender. The aim of the current research is to explore this communion-over-agency effect on advertising effectiveness and its underlying mechanism. Two studies provide evidence for a communion-over-agency effect on advertising effectiveness (i.e., attitude toward the ad and brand). These studies show that the communion-over-agency effect on attitude toward the ad is mediated by endorser likeability (simple mediation). The effect on attitude toward the brand is mediated by endorser likeability and attitude toward the ad (serial multiple mediation). In concert, this research underscores the significance of communion (and agency) on endorser evaluation and advertising effectiveness.     

Search Engine Advertising Adoption and Utilization: An Empirical Investigation of Inflectional Factors

Search engine advertising (SEA) is a prominent source of revenue for search engine companies, and also a solution for businesses to promote their visibility on the web. However, there is little academic research available about the factors and the extent to which they may influence businesses’ decision to adopt SEA. Building on Theory of Planned Behavior, Technology Acceptance Model, and Unified Theory of Acceptance and Use of Technology, this study develops a context-specific model for understanding the factors that influence the decision of businesses to use SEA. Using structural equation modeling and survey data collected from 142 businesses, this research finds that the intention of businesses to use SEA is directly influenced by four factors: (i) attitude toward SEA, (ii) subjective norms, (iii) perceived control over SEA, and (iv) perceived benefits of SEA in terms of increasing web traffic, increasing sales and creating awareness. Furthermore, the research we discover six additional factors that have an indirect influence: (i) trust in search engines, (ii) perceived risk of SEA, (iii) ability to manage keywords and bids, (iv) ability to analyze and monitor outcomes, (v) advertising expertise, and (vi) using external experts.     

The impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value

This research examines the impact of online display advertising and paid search advertising relative to offline advertising on firm performance and firm value. Using proprietary data on annualized advertising expenditures for 1651 firms spanning seven years, we document that both display advertising and paid search advertising exhibit positive effects on firm performance (measured by sales) and firm value (measured by Tobin's q). Paid search advertising has a more positive effect on sales than offline advertising, consistent with paid search being closest to the actual purchase decision and having enhanced targeting abilities. Display advertising exhibits a relatively more positive effect on Tobin's q than offline advertising, consistent with its long-term effects. The findings suggest heterogeneous economic benefits across different types of advertising, with direct implications for managers in analyzing advertising effectiveness and external stakeholders in assessing firm performance.