Consumers seem to like search engine advertising

We analyze a large-scale field experiment conducted on a US search engine in which 3.3 million users were randomized into seeing more, or less advertising. Our data rejects that users are, overall, averse to search advertising targeted to them. At the margin, users prefer the search engine with higher level of advertising. The usage of the search engine (in terms of number of searches, and number of search sessions) is higher among users who see higher levels of advertising, relative to the control group. This difference in usage persists even after the experimental treatment ends. The increase in usage is higher for users on the margin who, in the past, typed a competing search engine’s name in the search query and navigated away from our focal search engine. On the supply side, higher level of advertising increases traffic to newer websites. Consumer response to search advertising is also more positive when more businesses located in the consumer’s state create new websites. Quantitatively, the experimental treatment of a higher level of advertising increases ad clicks which leads to between 4.3% to 14.6% increase in search engine revenue.

Overall, patterns in our data are consistent with an equilibrium in which advertising conveys relevant “local” information, which is unknown to the search engine, and therefore missed by the organic listings algorithm. Hence, search advertising makes consumers better off on average. On the margin, the search engine does not face a trade-off between advertising revenue and search engine usage.

That is from Navdeep S. Sahni and Charles Zhang, via the excellent Kevin Lewis.

Comments

Google bot is an intelligent phone book.

Thanks, Google and Facebook for making America a more Chinese-like technological authoritarian surveillance police state.

When the search engine gives nothing but advertising spam for its top hits, the number of searches and sessions go up. I often go to the 2nd or 3rd page to get anything remotely relevant, which will juice the search metric. I also often change my keywords a few times because I get more spam and content farm crud, which will juice the session numbers.

Another love letter to big business. (And the inevitable CP comment about how the big bad business wolf is really preying on the consumer sheep.)

Personally, I prefer Prof. Cowen's description of what he recently wrote a book length love letter to - 'abstract, shark-like legal entities devoted to commercial profit.'

And the inevitable comment about cuckoldry. You know its coming.

When I worked at Google, one goal of the ads team was that users should prefer the quality of the average ad to the quality of the average organic result. Surprisingly, they were able to achieve this goal. Especially for simple, one- or two-word queries with clear commercial intent, the right form of auction can perform just as well as an algorithm that inspects only the websites.

Perhaps works for jeans or a smartphone but it totally sucks for hotels.

Just Google hotel + "vacation destination" and the first 15-20 results is trash which comprises ebookers, tripadvisor, booking.com ,hotels.com, expedia.

If you book directly at the hotel you get a 5-10% lower price compared to the top search result. Reserving through an intermediary may give the consumer some value in terms of peace of mind and credit card data safety. But, I'm not that naive and old yet. Conversely, using hotels.com to find a hotel and then book directly is great.

I think you misunderstand. When you search for [hotel ], the organic search results are stuff like hotels.com, and the ads are *also* stuff like hotels.com. So the quality of the ads and the quality of the organic search results are about the same there.

That's the precise issue, the organic search result is correct and the ads are also correct. The algorithm is working fine.

Albeit, as consumer I want to get the results from the hotels websites which prices are 5-10% below hotels.com

Nice deflection from the Goolag antitrust lawsuit. Hope those Stalinists lose. Hope they pay billions in fines. Hope they get broken up. Hope to drink the salty tears of libertarians.

https://www.foxbusiness.com/technology/google-california-antitrust-alabama

A few months ago I scoured the internet trying to find a way to actively help Google show me better ads. Unfortunately I wasn't able to achieve anything.

I'm mostly thinking about display ads and YouTube rather than SEM. SEM is just responding to an explicit input - it's not much different from the organic results. But display ads and YouTube ads, when good, provide lots of nice pleasant surprises. Done well, it's an unprompted "you might like...".

Who are these people that click on ads? I only click on an ad by mistake. I never click on ads.

You don't seem to realize that this web site is basically an ad. Though infotainment is certainly a defensible term regarding MR, too.

However, calling it a moon shoot is only good for laughs.

"You don't seem to realize that this web site is basically an ad. "

So are you admitting someone is paying you to post? Is it the Russians?

And here we thought it was just because GMU fired you 30 years ago. Was that just a cover story?

Well played

One will recall the early days of the computer, when searches required lots of detail and code. Google (and other search engines) offered relief from that laborious task. But the relief was short lived. One will also recall the founders of Google promising not to take Google to the dark side. That too was short lived. The internet brings out the best of capitalism, and the worst.

ad clicks seems like a rather questionable metric to base such an analysis on given all the gaming that occurs there with the bots. How was the fraudulent clicks controlled for?

I admit I don't have the patience to read the 75 page paper, so perhaps it is excellently done (after all, the authors are at Stanford). But: the measure appears to be use of the search engine after the experiment was done. Isn't it possible that the increased use - which the authors see as evidence of beneficial advertising - really represents increased cost, in terms that the search engine is becoming more difficult to use due to the irrelevant advertising material? Like another commentator, I try never to click on the ads (although it is at times hard to tell the ads from the "organic" results). But I could be different than most search users - who apparently love advertising (they probably love those robocalls as well).

Another implicit assumption appears to be that the search engine market is very competitive so that consumers would switch if they found one engine to be less useful to them. While this may be true in theory, my suspicion is that there is a great deal of inertia in the use of search engines. At least, that is true of my behavior.

I haven't read the whole paper but I'm already baffled by it. They do not actually reduce ads, they merely move them around on the page, it seems, and claim that this reduces obtrusiveness in exactly the opposite of what anyone else would say, and when they address the literature which finds consistent large harms from advertising, they have this to say:

"In general, advertising causing a decrease in usage of the media does not imply that consumers are averse to advertising, or get
negative utility from it. If advertising appears useful, consumers may click on it and exit the media platform to each the advertiser’s
website, decreasing media usage. Further, advertising can decrease media usage if the advertised product competes with the media
platform for time. For example, Upwork (a freelancer job portal) advertising on Pandora might cause consumers to get a job, and listen
to radio less often."

Are these people for real?

If people are using it more, it's because they like it. If they are using it less, it's because they found a job through an ad. Corporate apologia and spin-doctoring at its best.

If you use the web as a "consumer" who is looking to "buy" goods, you perhaps would not find advertising offensive and annoying at the margin. After all, advertising, at the margin, may help you buy goods.

If you're using it to research, read news, then it's fucking annoying, yeah.

What's funny is the Bing team warned everyone about this back in 2012: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.294.8275&rep=rep1&type=pdf

When your results get worse, short-term clicks and activity per user go up. And then you pay for it in the long run and the totals.

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