Date of Original Version

8-2014

Type

Working Paper

Abstract or Description

We study the impact of changes in the position of competing listings in organic search results on the performance of sponsored search advertisements. Using data for several keywords from an online retailer’s ad campaign, we measure the impact of organic competition on both click-through rate and conversion rate of sponsored search ads for these keywords.

We find that changes in the position of competing listings in organic results do not impact the click performance of the advertiser. We also find that competing organic listings in higher positions have a negative impact on conversion performance for generic keywords, but may help conversion performance for more specific keywords.

Our results inform advertisers on how the presence of organic results influence the performance of their sponsored advertisements. Our results also provide insight into consumer behavior in sponsored search settings. Specifically we show that consumers pay different levels of attention to search results depending on their search stage, and that this can result in differential impact of organic results on click and conversion performance of sponsored search advertisements.

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