On the Effects of Competing Advertisements in Keyword Auctions
This study looked to understand the impact of advertisements for competitor companies when they are placed in the same area of a search engine. The researchers were able to determine that “all clicks are not created equal”, especially when it comes to competing companies (1). Knowing the impact of advertisement layout is essential for keeping and gaining advertising customers.
As we learned in class, advertisements are the main source of revenue for search engines. Offering companies a personalized experience for every potential customer makes them more likely to purchase advertisements.
It is important for search engines to learn about any potential advertisement combination that could cause a conflict. Researchers from this study wanted to find out how serious the impact of other competitor advertisements would be on an ad’s click through rate. This research can then be used when search engines create their ad layouts. The better the ad layouts, the higher the conversion rate, the more interested companies are in purchasing advertisement slots.
The researchers based their study on three previously researched topics. These were: that consumers have a limited attention span, competitor ads in the same area will reduce the effectiveness of each ad, and that too many choices causes additional problems for consumers.
Through their research they were able to determine that a website viewer will be more “likely to click on an ad with higher relevance and… more likely to convert on an ad with higher relevance” (2). However, this statement becomes irrelevant when customers are faced with multiple competitors for the same good in the same screen. When searchers are forced to choose between competitors they will be more likely to choose only one ad, or, more likely, neither.
All of this is important for what we are learning in class. When studying the impact that an ad could have based on its placement on the screen, we have neglected to consider the impact that ads have on one another. We should really be taking into account the placement of all the ads when we consider the value that each ad slot individually holds.
http://www.cs.upc.edu/~igiotis/externalities.pdf