Economist Steven Tadelis at the University of California, Berkeley, who compared whether consumers are more likely to click on paid ads than on free, generic search results, says he found paid ads don't always pay off.
To measure the effectiveness of paid search, Tadelis and colleagues, working with a research team at eBay, turned off eBay's paid search in 68 direct marketing areas in the U.S.
In other words, if a consumer typed in the search term "white blouse" while online in these markets, they would only see the generic search results at the top of the list; not the paid ads that typically appear in a shaded box at the top of the search.
At the end of 60 days, the researchers compared sales of two groups: one group that received no paid search results and another group in which paid search remained untouched.
Consumer sales as a result of the paid search showed no measurable increase off those who made purchases via unpaid channels, they said.
"We found that when you turn off the paid advertising, almost all of the traffic that came through the paid search is just substituted by the other free channels," Tadelis said.
"If advertising is indeed a strong driver of sales, we should have seen sales plummet," he said. "But the impact on sales was indistinguishable and not significantly different than zero."
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