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Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
Getting to Number One: The Value of Top Positioning in Paid Search Results
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Getting to Number One: The Value of Top Positioning in Paid Search Results

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This literature review evaluates peer-reviewed studies to establish measures of success in advertising, specficially reviewing the implicit value of advertising spending on the perceived value of …

This literature review evaluates peer-reviewed studies to establish measures of success in advertising, specficially reviewing the implicit value of advertising spending on the perceived value of products, in addition to clicks and conversions, and then evaluates the research to date impacting ad success and moderating ranking success to determine how to best design paid search advertising programs.

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  • 1. Running head: GETTING TO NUMBER ONE 1 Getting to Number One: The Value of Top Positioning in Paid Search Results Nicole Cathcart The Johns Hopkins University
  • 2. GETTING TO NUMBER ONE 2 AbstractWith paid search now representing a multi-billion dollar industry, evaluating critical successfactors in advertising efficacy takes on a position of supreme importance to advertisingpractitioners. This literature review evaluates peer-reviewed studies to establish measures ofsuccess in advertising, specficially reviewing the implicit value of advertising spending on theperceived value of products, in addition to clicks and conversions, and then evaluates theresearch to date impacting ad success and moderating ranking success to determine how to bestdesign paid search advertising programs. The study concludes that when best practices havebeen implemented in program design, an unknown brand can see more success in advertisingwhen bidding on the top placement in search results.
  • 3. GETTING TO NUMBER ONE 3 The search engine has rapidly become an indispensable part of the online experience. Somuch so that google is now part of our language, not as a noun, but as a verb—to google hasbecome synonymous with searching online. Search engine results have become an essential partof the researching and buying process. With users performing millions of searches daily, searchengine advertising, more commonly referred to as paid search, represents a powerful marketingchannel for organizations and a growing global economic value (McKinsey & Company, 2011).Google’s 80 percent share of the paid search market alone totals $10.92 billion (Advanced MediaProductions, 2011). Advertisers have been obviously willing to pay to appear in results, and theresults appear to be very positive. Paid search may result in greater customer lifetime value(Chan, Wu, & Xie, 2011) and return-on-investment (Rutz, Trusov, & Bucklin, 2011) than otheronline advertising channels. Paid search advertising includes many different points of a successful campaign.Advertisers bid on search term, or keyword, clicks for ads—the higher the number of searchesfor a term and the higher the amount of competition for a search term, the more expensive thekeywords. The search engine will display the ads each time a user searches for a term, known asan impression, but will only charge the advertiser when the user clicks on a particular ad. Thesetwo measures, impressions and clicks, form the backbone of the paid search program. Withinthis process, advertisers can create dynamic ad groups with different copy, optimizing groups torun the most successful ads most often. However, these measures represent only intermediatemeasures of success for most campaigns. While attracting visits and traffic with the ultimategoal of brand awareness or brand engagement might be the goal for some, other advertisersconsider conversions, often purchasing, as the true measure of success.
  • 4. GETTING TO NUMBER ONE 4 One important element affecting price of keywords is positioning. The top spot in searchresults can be both an expensive and coveted position for advertisers. When controlling forcommon advertising tactics, including customer reviews, consistency of ad messaging,promotions and previous brand awareness, the position becomes the most important factor.While paid search is undeniably a popular advertising tactic, this study will seek to show that foran unknown brand, an ad campaign relying on best practices in construction will be most successwhen it appears in the top position of search results. Two measures of success are evaluated inthe literature. The first suggests that the consumers apply perceive value based on an implicit orexplicit advertising spend, represented as top placement in search results. The second measureof success is more traditional and featured throughout the evaluation—both ad clicks andconversions. Literature Review Numerous methods exist for measuring success in paid search advertising. Direct return-on-investment through paid sales and customer lifetime value are two of the most popular foradvertisers. However, the literature suggests that advertising spending, both explicit andimplicit, can impact the perceived quality of the product even with faced with more objectivemeasures. Product quality is an antecedent to purchasing online (although factor such as trustremain more significant), and is used here as a measure of success in evaluating the impact ofsearch placement. In order to properly control for the impact of top placement in sponsoredresults, a number of challenges emerge. While the use of an unknown brand removes bias fromthe ad selection process, a number of factors impact ad success in addition to placement,
  • 5. GETTING TO NUMBER ONE 5including: landing pages, ad copy, complexity of search terms, promotional offer, and relevancyof ad. In order to isolate the impact of positioning, the literature exposes the most significantvariables that contribute to ad success. Through this process, a clearer method of controlling forall variables emerges.Signals of Product Quality through Advertising Spending Ad positioning within paid search directly relates to advertising spend. The higher the adplacement, the more the brand has spent on the ad. Within the context of an unknown brand, theadditional budget, either explicit or implicit, may impact the ad’s success, as the advertisinginvestment itself can signal a brand’s trustworthiness. The literature shows that as long as theadvertising spend is not hugely different than similar spending within category, evidence ofcompetitive ad spending can positively impact perceptions of brand or product quality, whichcan have a direct impact on intent to purchase. A perception of higher than average ad spending can yield both higher perceptions of productquality and higher purchase intentions. In an experiment with 425 male and femaleundergraduate students, subjects were randomly assigned to groups to determine the effect of adsize (an implicit measure of ad spending) on product quality (Homer, 1995). Within twoconsumer product categories, eight ads were presented. In one group, the ads were all the samesize, and in the experimental group, the content was the same, but some ads were presented atlarger sizes. The study showed both significant correlations to product quality and purchaseintentions. The subjects perceived a higher ad budget, therefore greater product quality, with theadvertisers who ran the larger ads. The purpose of this study was not to evaluate unknown
  • 6. GETTING TO NUMBER ONE 6brands, specifically, so the results show a general significance based on ad spending, but they donot control for the impact of a known or unknown brand. However, trust in an unknown brand can increase based on knowledge of a competitivead budget especially in a competitive landscape of products with seemingly small branddifferences. In a two-part survey, 484 undergraduates first evaluated brands within six consumercategories, recording familiarities and perceived differences between multiple products andbrands (Barone, Taylor & Urbany, 2005). In the second part of the survey, a fictitious watchbattery brand was introduced, with data about the brand, distribution outlets, and advertisingcreative and budget were presented. Different data was randomly used for the advertisingbudget, ranging from relatively low ($8.5 million) to high ($55 million). Results indicated thatwhen the ad spending was roughly equivalent for an unknown brand versus its competitors, theperceived qualify of the brand was high. The study was careful to point out that spendingconsiderably more than known brands within a single category could possibly be a sign ofdesperation, perhaps indicating a problem in product quality. In those cases, high advertisingbudgets had a negative impact on perceived product quality. Even with objective data on product quality, market share, and product pricing,advertising spending can generate higher levels of perceived product quality. With a goal ofspecifically isolating the impact of advertising spending on perceived product quality,researchers used two survey groups, one of 40 part-time MBA students and one of 44 universitystaff (Moorthy & Zhao, 2000). The surveys included details on product market share, price,objective product reviews through consumer reports, in addition to advertising spending. Theresults indicated that the higher advertising spending correlated to higher levels of perceivedproduct quality. Past purchase of a product appears to only diminish these results, showing that
  • 7. GETTING TO NUMBER ONE 7the strength of the advertising budget outweighs even primary experience with products. Theresearch did not include data about purchasing intentions, however. Although perceptions ofproduct quality may be an indicator of purchasing intention, they are not a guarantee ofpurchase—inclusion of questions to indicate purchase intentions might give more weight toprevious purchases and price, for example. Indications of a higher advertising spend, either implicit through ad sizes, or explicit insharing the advertising budget, can affect the perceived quality of a product. While many factorscan influence the success of an advertising campaign, the implications for paid search are clear—the higher the placement, the higher the budget. If the creative of a campaign adheres toacceptable standards, the additional expense of a top-placed search ad alone may impact the ad’ssuccess by indicating a higher level of product quality than any other placement.Significant External Factors in Ad Efficacy Although the focus of this research is to determine the impact of ad positioning overother advertising elements, a variety of factors impact ad efficacy. Just as with offlineadvertising, or other online advertising placements, placement is only one factor contributing tothe purchasing process. In online advertising, a series of unique factors, such as landing pages,online reviews, and search task complexity can impact success in addition to more traditionalcreative elements, such as copy. Understanding multiple elements that contribute to the successof an ad can help control all the factors that impact a campaign. The literature shows the impactof multiple factors external to placement impact success in ads, from clicks to conversions. One of the most important factors impacting online purchasing processes, customerreviews, can also impact the efficacy of paid search through the landing page. Numerous studies
  • 8. GETTING TO NUMBER ONE 8analyze the impact of online reviews in the general online purchasing process (Fagerstom, 2010;Zhu & Zhang, 2010; Chen, Ma, Li, Dai, Wang & Shu, 2010), but evidence suggests that evenwhen compared against other elements in paid search advertising, online reviews cansignificantly impact conversions in the ecommerce process. Using the number of paid search adimpressions, click-through rate, conversions, competitor ads and costs, plus the number ofreviews and sales for low- and high-involvement products from three months of data from anonline Korean eBay-like marketplace, researchers used regression analysis to determine thatconversions and consumer reviews were the only significant factors contributing to ad efficacy(Kim, Park, Kwon, & Chang, 2011). Online reviews appear on the landing page of an ad, so thelanding page creative represents one of the most significant ways to impact the purchasingprocess online. Although landing pages can be a critical component for increasing conversions, ad copycan increase the number of clicks to an ad, an important intermediate factor of success. Inparticular, carrying through the users’ search term to the ad copy can significantly impact clicks.In an experiment in cooperation with an academic publisher where two keyword phrases werebid on (Richardson, 2007), and each keyword phrase featured an ad identical except one includedthe search term in the headline and one did not. The results indicated a significant increase in adclicks when the keyword was used in the headline. Creation of a consistent message based onthe user input keywords, appears to be a significant factor of ad success. Consistency in messageon the landing page can also impact ad success, suggesting that ad creative personalized based onthe searcher’s keyword terms that follows through the entire purchasing process will yield thegreatest results.
  • 9. GETTING TO NUMBER ONE 9 While many studies have indicated that advertising is less effective when users feel theyare being actively persuaded (Rogers, 2007), the complexity of the search process may negatethe impact of that persuasion. In an 2 x 2 experiment featuring 102 undergraduate students,subjects were assigned to one of four conditions, two primed with the knowledge that companiespaid for sponsored ads and two with a complex search task, finding that users were less likely toclick on sponsored advertising when primed with the information that the listings werepersuasive, but when the search activities were complex, the priming was less effective, or thefact that the ad was sponsored was less important (Yoo, 2009). While organic listings are oftenmost popular because of the knowledge of advertiser persuasiveness, more complex searchesmake sponsored listings more popular. While a complex search activity is not likely to be a goalin advertising design, the implication that a more difficult question is more easily answered by asponsored listing. In order to determine the impact of ad placement to the efficacy of an ad, anunderstanding of the main elements impacting ad success is necessary. Evidence suggests thatutilizing user reviews on the landing page, including relevant search terms in ad copy, andcomplex search activities can all increase the success of sponsored advertising.Promotional Offers and Competition as Moderators of Ad Placement Efficacy This research seeks to understand the importance of search engine ranking, specificallytop placements, within the context of other advertising factors. Limited research exists on theimportance of top placement in paid search listings, and what does exist seeks to identify otherfactors that impact success beyond rankings. The use of promotional offers, the relevancy of the
  • 10. GETTING TO NUMBER ONE 10ad to the original search goal and the impact of well-recognized brands as paid searchcompetition all impact the effectiveness of page rankings. A popular tactic of advertising is the use of promotional offers, including discounts, togenerate urgency related to the purchase of a product. Offers included in the ad text itself canencourage clicks to an ad. Researchers developed a model using aggregated daily click andconversion data collected from the ringtone industry, taking the top 80 keywords over 20 days,with each keyword having unique ad copy. Results showed that users who respond more to adswith higher placements in search results are also more price sensitive, or respond better todiscount offers in the ad text (Rutz & Trusov, 2011). The study was focused on the pricesensitivity of the users themselves, suggesting that when given opportunities to purchase low-priced or low-involvement items, the inclusion of a discount offer can help eliminate thecompetition from lower-placed ads. For the unknown brand, the known brand presents the greatest barrier to paid searchsuccess. In most cases, regardless of placement, a trusted name will generate clicks over anunknown name. Researchers developed a model to evaluate the impact of ranking and brandname on performance, then used data from a leading Korean search engine for empiricalevaluation (Jerath, Ma, Park, Srinivasan, 2010). The data included 15 days of impressions,positions and clicks from all search terms. This was compared against whether the advertisercould be considered low- or high-quality, which was based on whether the firm was familiar tothree different coders and was found highly-reliable. Researchers found that in 25 percent ofsearches where the low-quality firm appeared above the high-quality firm, the low-quality firmreceived a click. A full 75 percent of the time, the recognized brand appeared below theunrecognized brand and still gained the click.
  • 11. GETTING TO NUMBER ONE 11 However, relevancy can directly impact the success of a campaign for an unknown brand.In a 2 x 2 experiment with 117 low- and high-internet searchers from a university environment,researchers found that when an unknown brand utilizes exact search terms and is listed in thefirst position of search results, it is significantly more likely to be selected than a brand that isknown, but not as direct a match with search terms (Dou, Lim, Su, Zhou, & Cui, 2010). Withinthis study, the researchers also determined that the first placement was more successful thanappearing in the fourth spot. The evaluation of ad ranking and top placement as a success factor is limited in theliterature, but a few factors emerge to moderate its efficacy. The use of promotional offers, thecompetition from more well-known brands, and the relevancy of search queries to ad results allimpact how successful the top placement in search rankings can be. Although the research seeks to show that primary ad placement is a leading factorimpacting perceived product quality, ad clicks and product conversions, multiple factors impactthe success of an ad. Working from the evidence that premium advertising spending cansignificantly impact a users’ perception of the product or likeliness to buy, the literature furtherexplores the elements impacting ad success. Significant evidence suggests that online reviews impact conversion rates, their impactappears to supersede the ad ranking (Kim et al., 2011). Indeed, this is no surprise considering theperceived bias of advertisers versus the opinions of satisfied or unsatisfied customers. Therelevancy of the ad copy in the context of the user’s search keywords or search goal alsosignificantly impacts ad efficacy (Richardson, 2007; Dou et al., 2010). When incorporatingthese factors, the importance of top page ranking can be appropriately measured and evaluatedfor its effect on perceived product quality, ad clicks and product conversions.
  • 12. GETTING TO NUMBER ONE 12 ReferencesAdvanced Media Productions (2011, July). Google dominates search advertising with 80% market share unaffected by the rise of Bing. Retrieved from http://www.advmediaproductions.com/blog/google-dominates-paid-search-advertising- with-80-market-share-unaffected-by-the-rise-of-bing/Barone, M.J., Taylor, V.A., & Urbany, J.E. (2005). Advertising signaling effects for new brands: The moderating role of perceived brand differences. Journal of Marketing Theory and Practice, 13(1), 1-13.Chen, M., Ma, Q, Li, M., Dai, S., Wang, X, & Shu, L. (2010). The neural and psychological basis of herding in purchasing books online: An event-related potential s tudy. Cyberpsychology, Behavior, and Social Networking, 13(3), 321-328.Chan, T.Y., Wu, C., & Xie, Y. (2011). Measuring the lifetime value of customer acquired from Google search advertising. Marketing Science, 30(5), 837-850.Dou, W., Lim, K.H., Su, C., Zhou, N., & Cui, N. (2010). Brand positioning strategy using search engine marketing. MIS Quarterly, 34(2), 261-279.Fagerstrom, A. (2010). The motivating effect of antecedent stimuli on the web shop: A conjoint analysis of the impact of antecedent stimuli at the point of online purchase. Journal of Organizational Behavior Management, 30, 199-220.Homer, P. (1995). Ad size as an indicator of perceived advertising cost and effort: The effects of memory and perceptions. Journal of Advertising, 24(4), 1-12.Kim, C., Park, S., Kwon, K., & Chang, W. (2011). How to select search keywords for online advertising depending on consumer involvement: An empirical investigation. Expert Systems with Applications, 39, 594-510.
  • 13. GETTING TO NUMBER ONE 13Jerath, K., Ma, L., Park, Y., & Srinivasan, K. (October 10, 2010). A Position Paradox in Sponsored Search Auctions. Johnson School Research Paper Series No. 36-09. Available at SSRN: http://ssrn.com/abstract=1464545McKinsey & Company (2011, July). Measuring the value of search. Retrieved from https://www.mckinseyquarterly.com/Measuring_the_value_of_search_2848Moorthy, S., & Zhao, H. (2000). Advertising spending and perceived quality. Marketing Letters, 11(3), 221-233.Richardson, P.S. (2007). The impact of organic versus non-organic headlines on response rates to search ads. Journal of Website Promotion, 2(3/4), 42-62.Rodgers, S. (2007). Effects of sponsorship congruity on e-sponsors and e-newspapers. Journalism & Mass Communication Quarterly, 84(1), 24-39Rutz, O.J., & Trusov, M. (2011). Zooming in on paid search ads—A consumer-level model calibrated on aggregated data. Marketing Science, 30(5), 789-800.Rutz, O.J., Trusov, M., & Bucklin, R.E. (2011). Modeling indirect effects of paid search advertising: Which keywords lead to more future visits? Marketing Science, 20(4), 646-665.Yoo, C.Y. (2009). The effects of persuasion knowledge on click-through of keyword search ads: Moderating role of search task and perceived fairness. J&MC Quarterly, 86(2), 401-218.Zhu, F., & Zhang, X. (2010). Impact of online consumer reviews of product and consumer characteristics. Journal of Marketing, 74, 133-148.

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