Google advertising value questioned by eBay

The study found that paying for ad words did not boost sales.

A report by auction website eBay has found that paying for advertising in the form of keywords on search engines has little effect on sales.

Platforms such as Google and Bing offer companies the option to "buy" words.

This means their websites appear more prominently if a person searches for a particular term.

The eBay study found that most people who clicked through as a result of this service were loyal customers who would have come to the site anyway.

"Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels," said an eBay representative.

In carrying out the study, presented at an economics conference held at Stanford University, eBay removed its paid-search keywords from MSN and Yahoo platforms in the US, while retaining them on Google.

Natural search

They found that without the advertising, users still clicked through as the results appeared on the search engine anyway.

"Removal of these advertisements simply raised the prominence of the eBay natural search result," read the report by Thomas Blake, Chris Nosko, and Steve Tadelis from eBay.

"Shutting paid search advertisements closed one (costly) path to a firm's website but diverted traffic to the next easiest path (natural search), which is free to the advertiser."

There is no suggestion that eBay now plans to change the way in which it currently spends on search engine advertising.

Google said that its own research suggested there was a significant increase in clicks as a result of search advertising.

But a company representative added: "Since outcomes differ so much among advertisers and are influenced by many different factors, we encourage advertisers to experiment with their own campaigns."

Household name

Dr Philip Alford, director of the Digital Hub in the School of Tourism at Bournemouth University, told the BBC that the size of the brand made a big difference to the effectiveness of paid searches.

EBay has become a household brand name, they already have a highly engaged user base," he said, adding that many people would search the website directly when shopping online.

"With Google ad words, particularly for smaller organisations, it can make a lot of sense because for some of them, their websites aren't at a stage yet where they have been sufficiently indexed by Google, so they struggle to come up in natural searches for terms.

"The more click your ad gets, you get rewarded over time with a higher listing as you are perceived by Google as being relevant," he added.

"But it is interesting that a lot of people still are paying for terms that actually appear quite high up the listings in the search results anyway."