Are Consumers Averse to Sponsored Messages? The Role of Search Advertising in Information Discovery

70 Pages Posted: 24 Aug 2019 Last revised: 26 Aug 2021

See all articles by Navdeep S. Sahni

Navdeep S. Sahni

Stanford Graduate School of Business

Charles Zhang

Stanford Graduate School of Business

Date Written: August 10, 2019

Abstract

We analyze a large-scale randomized field experiment in which a search engine varied the prominence of search ads for 3.3 million US users: one group of users saw the status quo, while the other saw a lower level of advertising (with prominence of search ads decreased). Revealed preference data reject that users are, overall, averse to the experimentally varied search ads which span a diverse set of searches and advertisers. At the margin, users prefer the status quo with the higher level of advertising. On the supply side, newer websites are more likely to advertise. Going from the lower to the higher level of advertising increases traffic to newer websites, with the newest decile of websites gaining traffic by 10%. Users also respond more positively to advertising when local businesses in their state create new websites.
Taken together, patterns in our data are consistent with a constructive role of search advertising in which it fills significant information gaps by conveying new information, which is hard for the search engines to gather, and therefore missed by the organic algorithms. Viewing search ads, at the margin we study, makes consumers better off on average.

Keywords: search advertising, search engine, marketing, economics

JEL Classification: M37, D83, L10

Suggested Citation

Sahni, Navdeep S. and Zhang, Charles, Are Consumers Averse to Sponsored Messages? The Role of Search Advertising in Information Discovery (August 10, 2019). Stanford University Graduate School of Business Research Paper No. 3441786, Available at SSRN: https://ssrn.com/abstract=3441786 or http://dx.doi.org/10.2139/ssrn.3441786

Navdeep S. Sahni (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Charles Zhang

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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