• ClickZ, Monday, January 23, 2006 10:15 AM

Economists say advertisers are paying more than they should for ads appearing on search engines like Google and Yahoo! In a research paper drafted by professors and students from Stanford, Harvard and the University of California at Berkeley, advertisers were found to have been "taken advantage of," by letting search engines know how much they would be willing to pay for a given keyword. Many studies have already shown marketers that grabbing the top position is not always best in optimizing one's search campaign. Optimizing search return on investment is often very case- and keyword-specific. For instance, the scholars found that many advertisers consistently bid the maximum they can afford, leading them to overbid next to those who finished in third places and below. Under the current system, top advertisers are only charged a penny more than the advertiser who finishes second, leading them to try and outsmart one another and driving up prices.

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