Competitive Advertising on Brand Search: Traffic Stealing, Adverse Selection and Customer Confusion

Abstract

We measure the effectiveness of competitive advertising on brand search using a large-scale, quasi-experimental ad allocation on Bing. Competitors are able to steal traffic from the focal brand, and they steal an order of magnitude more clicks if the focal brand's link is exogenously removed from the top paid position (6-15% instead of 1-2% of traffic). The traffic stealing is primarily done by a competitor in the top paid link (6-9% of traffic) who bene ts from the presence of other competitors below. However, the probability of an immediate conversion on these stolen clicks is low, with around 20-47% of consumers returning to Bing in less than 30 seconds after the click, compared to 7% for consumers clicking on the focal brand's link. More relevant competitors get more clicks with lower quick-back probability. We discuss the managerial implications of our estimates and compute the quality-adjusted cost of competitors' offense and focal brands' defense.