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 finds consumers prefer organic listings in the top-ranked positions to sponsored listings of the same product/position. Consumers become indifferent between sponsored and organic listings in the lower-ranked positions. A mechanism check suggests top-ranked organic listings are perceived as more credible than seller-subsidized sponsored listings. Despite consumers' preference for organic listings, a simulation analysis shows an advertising seller may benefit financially if a lower-ranked organic listing can be replaced with a top-ranked sponsored listing.

Keywords: Sponsored listings, online marketplace, field experiment, native ads, ad avoidance