How do search ads induce and accelerate conversion? The moderating role of transaction experience and organizational type

Abstract

This study examines how paid search advertising affects conversion probability and selling duration on e-marketplace platforms, as well as how these effects are moderated by two advertiser characteristics: transaction experience (regular vis-à-vis new) and organizational type (business vis-à-vis individual). We develop a model that includes both conversion incidence and selling duration, thus accounting for the correlation between the variables. The proposed model is calibrated using data on one million randomly selected used cars traded in an online marketplace. The results reveal that search ads increase conversion probability significantly, by a remarkable 65.26%, and shorten selling duration by 3.51 days, on average. The effect on conversion probability is greater for new (individual) advertisers than it is for their regular (business) counterparts. By contrast, the shortened selling duration is more pronounced for regular (individual) advertisers than it is for new (business) advertisers. Finally, we discuss the implications of these findings for marketplace sellers and platform companies.