Attribution Strategies and Return on Keyword Investment in Paid Search Advertising
Li, H., Kannan, P. K., Viswanathan, V., & Pani, A. (2016). Attribution strategies and return on keyword investment in paid search advertising. Marketing Science, forthcoming.
42 Pages Posted: 20 Apr 2016 Last revised: 4 Jul 2017
Date Written: December 1, 2015
Firms use different attribution strategies such as last-click attribution or first-click attribution to assign conversion credits to search keywords that appear in their consumers’ paths to purchase. These attributed credits impact a firm’s future bidding and budget allocations among keywords and, in turn, determine the overall return-on-investment of search campaigns. In this paper, we model the relationship among the advertiser’s bidding decision for keywords, the search engine’s ranking decision for these keywords, and the consumer’s click-through rate and conversion rate on each keyword, and analyze the impact of the attribution strategy on the overall return-on-investment of paid search advertising.
We estimate our simultaneous equations model using a six-month panel data of several hundred keywords from an online jewelry retailer. The data comprises a quasi-experiment as the firm changed attribution strategy from last-click attribution to first-click attribution half-way through the data window. Our results show that returns for keyword investments vary significantly under the different attribution strategies. For the focal firm, first-click attribution leads to lower returns and the revenue decrease is more pronounced for the more specific keywords. Our policy simulation exercise shows how the firm can increase its overall returns by better attributing the real contribution of keywords. We discuss how an appropriate attribution strategy can help firms to better target customers and lower acquisition costs in the context of paid search advertising.
Keywords: attribution strategies, paid search advertising, ROI, keyword specificity, budget allocation, simultaneous equations system
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