Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment

35 Pages Posted: 2 Jun 2014 Last revised: 14 Aug 2022

See all articles by Tom Blake

Tom Blake

eBay Research Labs

Chris Nosko

University of Chicago - Booth School of Business

Chris Nosko

National Bureau of Economic Research (NBER)

Steven Tadelis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: May 2014

Abstract

Internet advertising has been the fastest growing advertising channel in recent years with paid search ads comprising the bulk of this revenue. We present results from a series of large scale field experiments done at eBay that were designed to measure the causal effectiveness of paid search ads. Because search clicks and purchase behavior are correlated, we show that returns from paid search are a fraction of conventional non-experimental estimates. As an extreme case, we show that brand-keyword ads have no measurable short-term benefits. For non-brand keywords we find that new and infrequent users are positively influenced by ads but that more frequent users whose purchasing behavior is not influenced by ads account for most of the advertising expenses, resulting in average returns that are negative.

Suggested Citation

Blake, Tom and Nosko, Chris and Nosko, Chris and Tadelis, Steven, Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment (May 2014). NBER Working Paper No. w20171, Available at SSRN: https://ssrn.com/abstract=2444538

Tom Blake (Contact Author)

eBay Research Labs ( email )

2065 Hamilton Avenue
San Jose, CA
United States

Chris Nosko

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chris Nosko

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Steven Tadelis

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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