Commentary

Making the Case for Paid-Search Ads: Why eBay's Study Shouldn't Scare Brands

EBay's newest study on search advertising claims ads have "no measurable benefit" to businesses. In the study, EBay concluded that the ads have very little impact on sales, with researchers warning that this medium may already be "beyond the peak of its efficacy."

While the validity of the data and analysis appears to be accurate, the conclusions associated with the study may be misleading. When you have the notoriety and presence of eBay, you may be able to get away with not investing as much in paid ads -- but for the typical advertiser, this is not the case. eBay's site by nature operates as a sort of secondary search engine, meaning that users that don't find a product they want on Google/Bing may end up heading to eBay next. Users that start with eBay may then go to the major search engines for other resources for the product.

The size of the brand matters, and eBay is one of the best-known online brands out there, next to other mainstays like Amazon. If smaller companies without the same name recognition did the same testing, they would see a noticeable impact on sales.

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eBay's History on Paid-Search Advertising

This isn't the first time eBay's name has been connected to less than favorable conclusions about the effectiveness of paid ads. Last year, when the first draft of the study was released, search engine marketing experts almost unanimously spoke out against its conclusions.

Matt Whelan, the head of search at The Digital House, best summed up the argument for search ads by saying: "We've recently performed a test for a market leader who dominates the natural results in a particular niche. We switched off their paid search and saw a 40% drop in traffic and, crucially, a 20% drop in online sales."

The fact that eBay decided to keep spending money on paid-search ads shows that while the study may portray paid ads in a negative light, the auction site still believes they produce enough value to continue spending money on them.

The Case for Paid-Search Ads

Looking at paid ads on search engines, eBay's study examined two main subgroups: branded and non-branded keywords.

For branded keyword terms, brands have the ability to supplement organic search results with paid advertising. Because many brands don't top search results, even for keywords that include the brand's name, bidding on paid ads can guarantee that they are the first thing searchers see. The strategy of bidding on a competitor's branded terms is not new, and should be expected by brands in competitive verticals. eBay, on the other hand, doesn't have this worry because it ranks highly -- if not first -- for almost every commonly used branded keyword. This organic power from eBay has the power to dramatically affect its conversion rates and sales, and in turn affect the results of the study.

Paid-search ads that don't directly turn into sales can also positively affect a brand in other ways. A new study from Google found that brands that bid for the top spot on paid-search ads saw a positive impact on brand awareness. The study found that across 12 verticals the ads, on average, raised brand awareness by 6.6 percent.

For non-branded terms, it’s important to recognize that eBay’s own study revealed that paid-search ads on non-branded terms did have an impact on users who have just signed up for an account or those who had made fewer than three transactions. It may not be paid-search ads as a whole that are ineffective for eBay, but the company’s targeting, content and keyword strategy. Looking forward, eBay might see better results from its paid advertising campaigns if it were to target audiences that are more receptive to its messaging -- which, according to the study, specifically includes new users.

The Solution for Sagging ROI

Brands that are not seeing the desired results from paid-search advertising should not give up and attempt to rely solely on organic traffic. We believe the answer is to do an audit of the strategy in place, test new targeting and content options and take a fresh look at the base of any successful paid advertising strategy, target keywords. By doing this, brands can identify areas of opportunity and the best ways to turn those opportunities into sales.

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