eBay questions value of Google's keyword advertising

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.