Competitive Advertising on Brand Search: Traffic Stealing and Click Quality

Abstract

We measure the effectiveness of competitive advertising on brand search using a
large-scale, quasi-experimental ad allocation on Bing. Competitors are able to steal
traffic from the focal brand, and they steal an order of magnitude more clicks if the focal
brand's link is exogenously removed from the top paid position (6-15% instead of 1-2%
of traffic). The traffic stealing is primarily done by a competitor in the top paid link
(6-9% of traffic) who benets from the presence of other competitors below. However,
the probability of an immediate conversion on these "stolen" clicks is low, with around
20-47% of consumers returning to Bing in less than 30 seconds after the click, compared
to 7% for consumers clicking on the focal brand's link. More relevant competitors get
more clicks with lower quick-back probability. We discuss the managerial implications
of our estimates and compute the quality-adjusted cost of competitors' "offense" and
focal brands' "defense."

Keywords: sponsored search, competitive advertising, brand advertising, customer confusion, adverse selection, field experiments

JEL Classification: M31, M37, D44