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

56 Pages Posted: 24 Aug 2019 Last revised: 28 Mar 2022

See all articles by Navdeep S. Sahni

Navdeep S. Sahni

Stanford Graduate School of Business

Charles Zhang

Stanford Graduate School of Business

Date Written: March 27, 2022

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 search ads sidelined). 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 where advertising fills significant information gaps by conveying new information, which is difficult for the search engines to gather and therefore missed by their organic algorithms. On average, viewing search ads makes consumers better off at the margin we study.

Keywords: search advertising, search engine, marketing, economics

JEL Classification: M37, C93, M21, L82, D82, D83

Suggested Citation

Sahni, Navdeep S. and Zhang, Charles, Are Consumers Averse to Sponsored Messages? The Role of Search Advertising in Information Discovery (March 27, 2022). 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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