EBay study questions value of Google's main ad service

I should disclose that I haven't shopped on eBay in many years.<p>Here's why, and why it's relevant:<p>I have a terrible experience on eBay.<p>The prices are great until the excessive shipping is added. Until payment I can generally get a response from the seller but after that it's like I don't exist. Then there are the outright scams.<p>And please note, I'm a _buyer_. I shudder to think that I should ever be a seller on eBay; sellers are left empty handed if a buyer claims "not as described." Example: <a href="http://www.cbsnews.com/8301-501465_162-57352136-501465/paypal-makes-ebay-customer-destroy-$2500-violin-seller-left-empty-handed/" rel="nofollow">http://www.cbsnews.com/8301-501465_162-57352136-501465/paypa...</a><p>When I try to shop for something online, even adding "-eBay" to a google search to drop eBay listings can be risky (it will eliminate any page that mentions eBay).<p>I believe this is relevant because the study is basically claiming eBay is well known enough that they don't need to advertise on Google. I'd argue exactly the opposite is happening: eBay is hemorrhaging users and a successful marketing campaign could change that. eBay needs Google more than Google needs eBay.<p>Amazon (mentioned in the article) and Apple are definitely innovative in the retail space. I notice they focus on targeted ads more than eBay does, because eBay's model is more hands off. And I think a direct consequence is Amazon and Apple can make good use of Google ads.<p>There's nothing wrong with "hands off" automation of big parts of your business. It works for Google.<p>But I can't really take eBay's study very seriously: if there are lots of customers and businesses who have grown tired of eBay (and PayPal), their advertising has got to be hurting.<p>Straighten out your house, eBay, and then people will want to stop by.

A bit of a misleading title. Ebay is questioning whether an big established, household brand like them still need to pay ads in Google search, because those users would come to them anyway.<p>In the same vein, google search ads probably have low value for facebook too.

Link to the actual research paper: <a href="http://conference.nber.org/confer/2013/EoDs13/Tadelis.pdf" rel="nofollow">http://conference.nber.org/confer/2013/EoDs13/Tadelis.pdf</a><p>(preliminary paper published and presented at the March 8 NBER "Economics of Digitization" Conference)<p>As a side note, you know an article (reuters) is dumbed-down linkbait when they don't even bother linking to the actual study they are referencing.

So, a big company with a strong brand that a lot of people recognize did a study to see how effective their PPC ads are. During the course of this study, they discovered that buying these ads didn't cause an appreciable increase in sales...<p>Consumers go through stages until they finally adopt your product (if they ever do). In the beginning, they have never heard of you, so they certainly can't become customers. Then, they gain some basic awareness that you exist. Once they gain some basic awareness, some may choose to learn more about you. And, after they gain more knowledge, some people will choose to make a trial purchase. Finally, if your product/service is good (and the experience is good), some consumers will choose to adopt your service - they will become long term customers (and a good source of word of mouth)...<p>I'd argue that PPC is great for awareness, knowledge and even (maybe) convincing people to make a trial purchase. But after that, the company itself has to provide a good service. Further, it's rather obvious that once the marketplace knows that you exist and knows a bit about you, you won't gain as much from this type of advertising...

I think this tells a more nuanced story than just "clicks aren't worth it."<p>Search advertising has been very lucrative for a lot of people, this was especially true when there were few contested keywords and the cost to land on a page was low by comparison.<p>However, if you look at Google's results over time, they grew spectacularly as they added advertisers and their price per placement was growing. Then the growth of advertisers slowed because there are only so many of them in the world, and in their latest results you can see that the price per click has stabilized (and declined slightly) as well. Both of those point to a maturing of the search advertising market.<p>My guess, and it's only a guess, is that Google's revenue from search ads has peaked. (Peak Ads anyone :-)) and going forward the dynamics of that market will be a lot more subtle. More complex advertising packages will be created that increase the total number of pages where ads are shown but do so in a way that spreads cost around (like discounting a front page add if enough "page 3" ads are bought at the top of that page).

I have run similar tests myself for a variety of clients.<p>Some end up with the same result as ebay; brand terms generate sales, but the incremental value of this is not worth the media spend.<p>For others, brand search advertising is a complete no brainer and they make a lot of money doing it.

This is not news, this is something very basic related to direct navigation traffic vs. paid traffic. If 50% of traffic is through direct navigation (ppl typing www.yourcompany.com on their browser to land on your site), and Google ads can bring you the other 50%, then that's great, otherwise not. Saying that people would've come anyway sounds amateurish and easy to measure. Stop buying ads and compare your traffic to your prior traffic. Direct nav. traffic for big brands such as Amazon and Ebay is around 50% of their total traffic, so obviously they benefit less from Google ads then companies whose direct nav. traffic is 5%...

The problem with this kind of analysis is that it's to short-sighted. The main benefit of advertising has never been direct conversions. Rather, the main benefit is keeping the brand in people's minds, so that they'll be more likely to come to you in the future.<p>When Coke buys a commercial slot on a TV network, do they expect someone to say "Holy crap, I need to drink a Coke right now!", turn off their TV, and drive to the grocery store? Of course not. They're playing a longer game than that.<p>This is also why the PPC model for internet advertising is totally broken.

Think Google ads don't matter? Stop advertising and wait for an upstart competitor to gain a foothold through those empty slots.

Ironically, Google has been pushing brands way up in search for 4-5 years now, and it may come back to bite them. Many said it was due to brands being more profitable for Google, but long term it builds brands to the point of users bypassing Google. Ah the challenges of being both an 'impartial' judge of content and the world's largest ad engine.<p>Another thing is the price, it has skyrocketed lately. What may have made sense at $0.40 a click, no longer does at $2 a click.