Effects of search engine advertising on user clicks, conversions, and basket choice

Abstract

Many firms place ads in search engines in order to motivate users to visit their website. However, users may react differently to an ad. For example, some users who intended to click on the organic result may now click on the ad, which creates unnecessary costs and diminishes profits. This paper presents the first systematic investigation of all effects on users an ad can cause during their search with a given keyword at a certain point in time. It covers the three sequential decisions users make: whether (and where) to click, whether to convert, and what (or how much) to buy. We develop a model by which each effect can separately be quantified and regressed on the search context, allowing insights into what drives user reactions. As a demonstration for its application, we conduct a large-scale field experiment on brand bidding, the practice of placing ads for brand names.