eBay recently conducted its own paid search experiment. The world’s largest online auction shut down search ads on Google, keeping a set of regions with search ads unchanged as a control. What they found was that paid ads had virtually no effect on sales, and when they did, the cost of the ads negated the benefit of the sales. Does this mean that paid search is ineffective? What do businesses need to know about eBay’s study?
Google generates over $46 billion a year in ad revenue. Oren Etzioni of the University of Washington and co-founder of Decide.com, says of eBay’s findings, “This has to be a major concern for Google. Strong brands like eBay, Amazon, and others need Google less and less as they have established a loyal online following.”
Here are some of eBay’s takeaways from their experiment:
- Paid search ads did work with searchers who did not buy frequently from eBay.
- If a searcher had shopped at eBay three times or more during the year, ads had no effect.
- For each $1 spent, the ads returned $0.25 in revenue. For branded keywords, the return was nearly zero.
- It is important not to confuse correlation with causation: that is, if you purchase a lot of ads in December and have a lot of sales, it doesn’t necessarily follow that you have those sales because of the ads.
eBay, Amazon, and other similar sites have enormous brand recognition. We can as easily, and more quickly, navigate directly to eBay than we could to Google, then eBay. It makes more sense. The news isn’t all bleak for Google or for those who purchase ads. It can be most beneficial for businesses that do not have the recognition or bulk that sites like eBay do – and that is a lot of businesses! That, in fact, is most businesses. Paid ads can help newer or smaller sites break into the search game and increase traffic. For these sites, the ROI can be much better.
Don’t abandon paid search just yet. Unless you’re eBay; then you can talk about it. The reality is that the vast majority of sites does not have the brand and name recognition. Paid search helps shine that spotlight on your business. Every business should, however, examine their ad campaigns and try to measure their efficacy and how they can get the most value for their money.