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

Stanford University Graduate School of Business Research Paper No. 3441786

Posted: 24 Aug 2019 Last revised: 20 Sep 2023

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). While lowering advertising significantly decreases the search engine's revenue as expected, users exposed to the decreased level of advertising also decrease their overall search engine usage. This reduction is more significant among multi-homing users. On the supply side, going from the status quo to lower level of advertising decreases traffic to newer websites, with the newest decile losing traffic by 10%.

Overall, our data suggest that viewing search ads makes consumers better off at the margin we study. We illustrate a constructive role of search advertising where advertising fills significant information gaps by conveying new information that is difficult for the search engines to gather and therefore missed by their organic algorithms.

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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