40 Pages Posted: 3 Oct 2015 Last revised: 15 Apr 2017
Date Written: April 13, 2017
On search keywords with trademarked terms, the brand owner (“focal brand”) and other relevant firms compete for consumers. For the focal brand, paid clicks have a direct substitute in the organic links below the paid ad(s). The proximity of this substitute depends on whether competing firms are bidding aggressively to siphon off traffic. We study the returns to focal brands and competitors using large- scale experiments on Bing with data from thousands of brands. When no competitors are present, we find a positive, statistically significant impact of brand ads of 1-4%, with larger brands having a smaller causal effect. In this case, the effective “cost per incremental click” is significantly higher than focal brands typically pay on other keywords. When focal brand ad is present, competitors in paid positions 2-4 can “steal” 1-5% of focal brand’s clicks, and raise it’s costs by shifting traffic to the paid link. Finally, for a set of brands that face competition on their brand search but choose not to advertise, competitors “steal” 18-42% of clicks, suggesting a strong causal effect of position. Under such position effects, we find the ROI on defensive advertising to be strongly positive.
Keywords: sponsored search, competitive advertising, brand advertising, firm behavior
JEL Classification: M31, M37, D44
Suggested Citation: Suggested Citation
Simonov, Andrey and Nosko, Chris and Rao, Justin M., Competition and Crowd-Out for Brand Keywords in Sponsored Search (April 13, 2017). Available at SSRN: https://ssrn.com/abstract=2668265 or http://dx.doi.org/10.2139/ssrn.2668265