After eBay: Testing PPC Effectiveness

Facebook Twitter Google + LinkedIn

In his featured post this month, Dr Dave Chaffey looks at the fallout from eBay's recently-released PPC report, and gives his thoughts on the importance of adequately testing PPC effectiveness.

A recent piece of research published by members of the eBay Research Labs received a fair amount of coverage since it suggests eBay may have been investing unwisely in paid search. I think it’s worth sharing since it shows how important it is to run reports and tests that prove the value of paid search investments.

The headline that was taken from the research by many commentators shows the importance of testing:

We present results from a series of large-scale field experiments done at eBay that are designed to detect the causal effectiveness of paid search advertisements. Results show that brand-keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates.

Some suggested that this calls into question the value of Pay Per Click advertising, but I think it’s dangerous to read too much into the research since eBay is a very different organisation from most which are using Google AdWords or Bing advertising to generate awareness and leads for their business.

eBay’s brand strength is such that they have limited competition for the type of purchases made there, and you would expect PPC ads to cannibalise the organic listings as the charts in this research show. I’ve seen tests from UK brands that show brand-bidding DOES drive incremental business. You will also notice that Amazon continues to bid aggressively on AdWords, and I know they test AdWords ROI extensively.

You may also know that eBay used to advertise on a huge range of keywords in a less targeted way than most businesses. The report acknowledges that eBay advertises on more than 70 million keywords - you may have seen the eBay ads for “nuclear fission”?

What businesses want from paid search is to drive awareness and sales from people who don’t know a brand. And behind the main headlines and articles written about this report there is evidence that PPC is effective for generating new customers: which is why most companies use it. The report states:

”We find that SEM accounted for a statistically significant increase in new registered users and purchases made by users who bought only one or two items the year before.

"For consumers who bought more frequently, SEM does not have a significant effect on their purchasing behavior.”

This review of the research reminds us that other general studies such as that by Google (naturally) showed that across their advertisers “89% of paid search clicks are “incremental,” while "roughly 66% of all ad clicks occur in the absence of an associated organic search result”.

It’s certainly an interesting piece of research and it should prompt brands to think about how they review the integration of their paid and natural search and to see how paid search budgets can be reallocated within campaigns to gain more incremental business.

Subscribe to our blog and get the latest industry-updates direct to your inbox