

EBay study questions value of Google's main ad service - tucson
http://www.reuters.com/article/2013/03/13/net-us-ebay-google-idUSBRE92C00M20130313

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sounds
I should disclose that I haven't shopped on eBay in many years.

Here's why, and why it's relevant:

I have a terrible experience on eBay.

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.

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:
[http://www.cbsnews.com/8301-501465_162-57352136-501465/paypa...](http://www.cbsnews.com/8301-501465_162-57352136-501465/paypal-
makes-ebay-customer-destroy-$2500-violin-seller-left-empty-handed/)

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).

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.

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.

There's nothing wrong with "hands off" automation of big parts of your
business. It works for Google.

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.

Straighten out your house, eBay, and then people will want to stop by.

~~~
Spooky23
I agree, eBay basically shares all of the bad aspects of a flea market with
the faceless bureaucracy of the DMV. eBay cannot effectively police it's
environment, and it's fee structure is outrageous.

If I want to deal with sketchy people to save a few bucks, Craigslist lets me
do that with a higher chance of a positive outcome for $0.

Also, you can exclude ebay from search results by entering "-site:ebay.com"

~~~
sounds
Thanks for the "-site:ebay.com"

I started with a longer paragraph there, talking about how annoying it is to
go on google shopping, find a great price, then look to the right. Oh, eBay.

Then I edited down my wall of text.

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nolok
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.

In the same vein, google search ads probably have low value for facebook too.

~~~
netrus
I could imagine a user using Google just to circumvent the category hierarchy
of a site like Ebay, e.g. searching for "Ebay washing machines". If this user
clicks an ad on the result page, it is super painful for Ebay.

~~~
OGinparadise
It may have to do with search boxes being built in browsers already. Type and
search, instead of going to ebay and then type-search. eBay may be bookmarked
but it's still not as easy to pull up as searching from a browser's window.

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andrenotgiant
Link to the actual research paper:
<http://conference.nber.org/confer/2013/EoDs13/Tadelis.pdf>

(preliminary paper published and presented at the March 8 NBER "Economics of
Digitization" Conference)

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.

~~~
qompiler
> Results show that brand-keyword ads have no short-term benefits, and that
> returns from all other keywords are a fraction of conventional estimates.

The article on reuters completely ignores the keyword 'short-term'.
Furthermore, if eBay had an actually viable competitor it would be fighting
for those ads with every penny.

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hluska
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...

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)...

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...

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ChuckMcM
I think this tells a more nuanced story than just "clicks aren't worth it."

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.

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.

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).

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rfergie
I have run similar tests myself for a variety of clients.

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.

For others, brand search advertising is a complete no brainer and they make a
lot of money doing it.

~~~
gav
It really depends on the market. I've found that brand terms can convert
really well if you can drive them to a targeted microsite or similar segmented
area. Usually it means that the customer is far down the purchase funnel, a
search for "washing machine" may be just research, "whirlpool washing machine"
can mean the brand part of the decision is already made ("whirlpool duet" is
even better).

~~~
rfergie
When I say "brand terms" I mean queries for the site's own brand. For example
"washing machines on ebay". I've never seen these keywords not convert well;
the question is how many of these people would convert anyway even without the
advert.

~~~
wildwood
That's why it's so important to track the natural search traffic you're
getting by search query, and line it up against the paid search traffic.

If you have strong natural search traffic on the term, then you should be able
to scale back your bid on that paid search term without much risk.

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ecolak
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%...

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mistercow
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.

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.

This is also why the PPC model for internet advertising is totally broken.

~~~
wildwood
The PPC model is essentially the same model as Direct Response Marketing, just
more fine-grained.

Both of these, if used properly, can make insane amounts of money for a
company. And, if used improperly, they are little more than a money sink.

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

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OGinparadise
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.

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.

~~~
andrenotgiant
I think there is more to "Google and Big Brands" story than what you have
mentioned.

1\. "Google has been pushing brands way up in search for 4-5 years now" -
True, but it's important to note this is not a result of Google deciding
"let's promote brands", it's a result of Google's algorithm improving. Google
looks at query chains, sees that people hit certain sites after a few
unsuccessful broad searches, and thus improves the broad search rankings of
those sites. It is no coincidence that a significant portion of these "certain
sites" happen to be big brands, which leads to point 2.

2\. Brand advertising creates affinity - As Eric Schmidt put it: "Brand
affinity is clearly hard wired." People end up at brand sites at the end of
query chains because they recognize them, they trust them more, or they are
just more familiar with them.

3\. Google has lots of Brand advertising space - A quick review of the numbers
of any Big Brand's SEM program will show some really abysmal inefficiencies
and totally unnecessary bias towards branded searches (that's another problem
altogether.) But the point is, Big Brands don't care if they could turn off
Paid Search Ads in some areas and get the same ROI through other channels,
they want to buy ads to signal they are a big brand, to saturate your vision
with their brand and create the above mentioned affinity and familiarity.

Thus the cycle continues and Google has nothing to worry about with regards to
big brands lowering Paid Search spend.

