Competitive Poaching in Search Advertising: A Randomized Field Experiment

Abstract

Keyword searches with brand names occur very commonly on search engines, which enables firms to infer not only when customers are searching for them, but also when customers are searching for their competitors. In other words, firms can generate traffic from search engine advertising by bidding not only on their own keywords but also on competitors’ keywords. The strategy of bidding on competitors’ keywords, known as competitive poaching, presents unique opportunities for academic research. In this research, we examine the factors that influence the effectiveness of competitive poaching, specifically the role of different ad copies and the type of competitor (poached brand) that a brand is “poaching” from. We also examine how competing sponsored ads from the poached brand and other advertisers have an impact on competitive poaching. We run a field experiment for a three-month period with a business school in northeastern United States, by bidding on keywords of competing schools and randomly displaying different types of ad copies. We find that ad copies that feature vertical differentiation are more effective than other ad copies when poaching on keywords of high-quality brands. We also find that when poaching from low-quality brands, ad copies featuring horizontal differentiation perform better than other ad copies. We further show that the presence of the poached brand’s own ad leads to a positive impact when that brand is high-quality, and a negative impact if the poached brand is low-quality. Finally, we also find that the presence of other advertisers using quality signals in their ad copies has a positive impact on clicks. However, use of vertical differentiation ad copies by the focal brand negatively moderates the impact of the presence of other advertisers using quality signals. The academic and managerial contributions are also discussed.