Do Sellers Benefit from Sponsored Product Listings? Evidence from an Online Marketplace

Abstract

Sponsored product listings on online marketplaces are third-party sellers’ ads blended in organic product listings. This paper investigates a seller’s managerial question: whether a sponsored listing outperforms an organic listing, and how the performance varies by positions. Our large-scale field study on a mobile app with experimental and natural variation shows that consumers avoid clicking or purchasing advertised products in the prime positions, yet the ad avoidance attenuates in the lower positions. A series of mechanism checks suggest that consumers perceive organic product listings in the prime positions to be high quality products. However, an ROI analysis predicts that an advertising seller can be financially better off, if an organic listing in a non-prime position is replaced with a sponsored listing in a prime position. The findings suggest that a seller can benefit from sponsored listings by position relocation, but not by visual prominence at a given position.

Keywords: Sponsored Listings, Online Marketplace, Field Experiment, Native Ads, Ad Avoidance