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Do Organic Results Help or Hurt Sponsored Search Performance?

Ashish Agarwal, Kartik Hosanagar, Michael D. Smith (2015) Do Organic Results Help or Hurt Sponsored Search Performance?, Information Systems Research 26(4):695-713, DOI 10.1287/isre.2015.0593

42 Pages Posted: 23 Jan 2012 Last revised: 25 Jan 2016

Ashish Agarwal

University of Texas at Austin - Red McCombs School of Business

Kartik Hosanagar

University of Pennsylvania - Operations & Information Management Department

Michael D. Smith

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management

Date Written: January 21, 2012

Abstract

We study the impact of changes in the competitors’ listings in organic search results on the performance of sponsored search advertisements. Using data from an online retailer’s keyword advertising campaign, we measure the impact of organic competition on both click-through rate and conversion rate of sponsored search advertisements.

We find that increase in organic competition leads to a decrease in the click performance of sponsored advertisements. However, organic competition helps the conversion performance of sponsored ads and leads to higher revenue. We also find that organic competition has a higher negative effect on click performance than does sponsored competition.

Our results inform advertisers on how the presence of organic results influences the performance of their sponsored advertisements. Specifically we show that organic competition acts as a substitute for clicks but has a complementary effect on the conversion performance.

Keywords: Sponsored search, Organic search, ad placement, hierarchical Bayesian estimation, online advertising, online auctions, search engine marketing

Suggested Citation

Agarwal, Ashish and Hosanagar, Kartik and Smith, Michael D., Do Organic Results Help or Hurt Sponsored Search Performance? (January 21, 2012). Ashish Agarwal, Kartik Hosanagar, Michael D. Smith (2015) Do Organic Results Help or Hurt Sponsored Search Performance?, Information Systems Research 26(4):695-713, DOI 10.1287/isre.2015.0593. Available at SSRN: https://ssrn.com/abstract=1989590 or http://dx.doi.org/10.2139/ssrn.1989590

Ashish Agarwal

University of Texas at Austin - Red McCombs School of Business ( email )

Austin, TX 78712
United States

Kartik Hosanagar

University of Pennsylvania - Operations & Information Management Department ( email )

Philadelphia, PA 19104
United States

Michael D. Smith (Contact Author)

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

HOME PAGE: http://www.heinz.cmu.edu/~mds

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