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Is PPC Advertising Really Worthwhile? eBay Dismisses PPC Advertising On Search Engines

Does pay per click (PPC) advertising serve any purpose? Is it worth the money and the effort? Many businesses that use PPC would no doubt tell you that it is, but others would claim that it is wasteful and unnecessary. The latest business to criticise PPC advertising is auction website eBay. In a report just released eBay claims that paying for advertising in the form of keywords on search engines has little effect on sales.

Platforms such as Google and Bing offer companies the option to “buy” words. These words then feature more prominently on the search engines. What that means is that companies who pay for these words will see their websites appear more regularly if a person searches for a particular term or keyword. However, eBay’s study which was presented at an economics conference held at Stanford University suggests that most of the people who clicked through as a result of this service would probably have done so anyway as they are generally loyal customers. According to an eBay spokesman:

“Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels.”

In carrying out the study, eBay removed its paid-search keywords from MSN and Yahoo platforms in the US, but retained them on Google. It found that without the advertising, users still clicked through as the results appeared on the search engine anyway. The report by Thomas Blake, Chris Nosko and Steve Tadelis from eBay concluded that:

“The removal of these advertisements simply raised the prominence of the eBay natural search result. Shutting paid search advertisements closed one (costly) path to a firm’s website, but diverted traffic to the next easiest path (natural search), which is free to the advertiser.”

However, it should be said that there is no evidence to suggest that eBay now plans to change the way in which it currently spends on search engine advertising.

Google maintains that its own research suggested there was a significant increase in clicks as a result of search advertising. But a company representative did add:

“Since outcomes differ so much among advertisers and are influenced by many different factors, we encourage advertisers to experiment with their own campaigns.”

However, Dr Philip Alford, director of the Digital Hub in the School of Tourism at Bournemouth University, told the BBC that it was the actual size of the brand which made a big difference to the effectiveness of paid searches:

“EBay has become a household brand name; they already have a highly engaged user base. With Google ad words, particularly for smaller organisations, it can make a lot of sense because for some of them, their websites aren’t at a stage yet where they have been sufficiently indexed by Google, so they struggle to come up in natural searches for terms”.

“The more click your ad gets; you get rewarded over time with a higher listing as you are perceived by Google as being relevant. But it is interesting that a lot of people still are paying for terms that actually appear quite high up the listings in the search results anyway.”

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