eBay questions value of Google's keyword advertising

No short-term gains and little effect on sales from spending on keywords, report claims

PUBLISHED : Friday, 15 March, 2013, 12:00am
UPDATED : Friday, 15 March, 2013, 3:13am

Businesses may be wasting billions of dollars a year buying up keyword advertising on search engines such as Google, a new report claims.

The study by auction website eBay claimed that most of the money spent buying up search terms was a waste of time and had little effect on sales.

Google has built its business on the back of persuading advertisers to buy keywords - such as their company name or a term such as "insurance" or "Christmas"- to get a link to their website high up on Google search rankings.

The search advertising market in Britain alone is worth about £3 billion (HK$34.7 billion) a year, with Google accounting for roughly 90 per cent of that. Google made close to US$37 billion from advertising in America in 2011, said the report.

"Results show that brand keyword ads [where firms buy ads on searches for their own name] have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates," said the authors of the research.

The 25-page report - titled Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment - found that most customers would have clicked through to a particular site without being prompted by an ad for the firm.

"[In the absence of paid search links] consumers simply substitute to organic search links [the results Google's search algorithm brings back without firms having to pay],"said the report.

"This implies that brand keyword advertising has neither persuasive nor informative value to well-known corporations."

The report found that "new and infrequent" users are influenced by ads. But it is "existing loyal users" - who already know all about a service and would already go to the website - who account for most of the clicks on paid-for keywords.

This suggests firms are wasting their money targeting ads at existing customers.

In doing the study eBay removed paid-search keywords using its brand name from Yahoo and Microsoft search engines and kept paying to keep them on Google.

eBay said its findings were likely to be equally relevant for other major brands, and raised questions about Google being an efficient marketing tool.

In response, a Google spokesperson said search outcomes differ among advertisers and encouraged them to experiment with their keyword campaigns.