Abstract

https://ssrn.com/abstract=2668265
 


 



Competition and Crowd-Out for Brand Keywords in Sponsored Search


Andrey Simonov


University of Chicago, Booth School of Business, Students

Chris Nosko


University of Chicago - Booth School of Business

Justin M. Rao


Microsoft Research; Microsoft Corporation - Microsoft Research - Redmond

September 30, 2015


Abstract:     
On search keywords that include 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 link that appears directly below the advertisements. This crowd-out can create a large wedge between the real causal effect and commonly-reported "nominal measures," such as click-through rates. We quantify this wedge using a large-scale, fully randomized experiment on Bing, which allows us to study 2,500 brands with a sufficient sample size. We find a positive, statistically significant impact of brand ads, with a modest size, on the order of 1-4%. There is significant heterogeneity, with more well-known brands showing a smaller causal effect. Competitors greatly impact the market. First, if the focal brand is not present in the top slot, competitors "steal" 10-20% of clicks on average. Second, when the focal brand is in the top slot, competitors steal only a modest fraction of clicks, 1-5%, but dramatically shift the focal brand's traffic from the organic link to the paid link, raising the focal brand's costs. Taken together, the results indicate the primary value of branded paid links is defensive in nature.

Number of Pages in PDF File: 41

Keywords: sponsored search, competitive advertising, brand advertising, firm behavior

JEL Classification: M37, D44


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Date posted: October 3, 2015  

Suggested Citation

Simonov, Andrey and Nosko, Chris and Rao, Justin M., Competition and Crowd-Out for Brand Keywords in Sponsored Search (September 30, 2015). Available at SSRN: https://ssrn.com/abstract=2668265 or http://dx.doi.org/10.2139/ssrn.2668265

Contact Information

Andrey Simonov
University of Chicago, Booth School of Business, Students ( email )
Chicago, IL
United States
Chris Nosko
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Chicago Booth School of Business Logo

Justin M. Rao (Contact Author)
Microsoft Research ( email )
641 Avenue of Americas
7th Floor
New York, NY 11249
United States
Microsoft Corporation - Microsoft Research - Redmond ( email )
Building 99
Redmond, WA
United States
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