Google Advertising Value Questioned by eBay

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By Alistair Charlton | March 14, 2013 4:12 AM EST

A study by online auction house eBay has questioned the value of Google's keyword advertising service and revealed that the majority of customers would still visit the website without seeing any adverts.

Google charges companies to appear alongside search results for keywords of their choosing so eBay might pay to appear as an advert next to search results for "online shopping" or "cheap shoes".

But an eBay report has claimed that links to its website appear high up in Google search results anyway - and free - so there is no need to pay money to appear as an advert on the same page.

The report said: "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."

The 25-page document added that advertising had "a very small and statistically insignificant effect on sales.

"This suggests that on average, US consumers do not shop more on eBay when they are exposed to paid search ads on Google."

However, eBay did accept that the adverts worked better for users who were new to the service, or had only bought items from the website once or twice in the previous year.

"For customers who bought more frequently, search engine marketing [SEM] does not have a significant effect on their purchasing behaviour," it added.

"We calculate that the short-term returns on investment for SEM were negative because more frequent eBay shoppers are accountable for most of paid search sales."

To conduct the research, presented at an economics conference held at Stanford University, eBay removed its paid-search keywords from MSN and Yahoo websites in the US and kept them on Google.

Although eBay's findings will not match those of all websites or retailers, the report highlights a concern for Google, which generated £30bn in advert revenue last year, up from £25bn in 2011.

As websites' SEO (search engine optimisation) improves and they appear higher up in regular - or "organic" - Google search results, then the less likely they are to see the attraction of paying to appear in keyword adverts on the same search results page.

Oren Etzioni, an online shopping expert and co-founder of shopping service Decide.com, told Reuters: "This has to be a major concern for Google. Strong brands like eBay, Amazon, and others need Google less and less as they established a loyal online following.

"The eBay study validates this common-sense conclusion. Even at the far smaller Decide.com, we've found that buying ads on Google was not cost-effective."

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