A study of Leakage Ratio for increasing performance of online keyword search advertising

Abstract

Background/Objectives: In this study, research to improve efficiency of online advertising market, we would like to propose a new performance index called "Leakage Ratio" which can increase the efficiency of advertisement. Methods/Statistical analysis: Naver, the Internet portal site in Korea, is the most influential medium for online keyword search advertising. In this study, Leakage Ratio management is applied to online keyword search ads for five medium and large size online shopping malls at Naver. Based on the performance trend of each search keyword, we tried to improve the efficiency of the whole advertisement by changing the bid of the low efficiency keyword. Findings: If results of online keyword search advertising such as online shopping malls are reflected in sales through conversion process, ROAS(Return on Advertising Spend) will be used as a performance index. The proposed LR(Leakage Ratio) management reduces the wasted advertising costs by managing search keywords with low ROAS. Most studies of existing improve keyword search ads are based on surveys, so there are relatively few studies that used actual keyword search ad data for analysis. In this study, we carried out an experiment using actual online keyword search ad operation to confirm the performance of the proposed LR management for online shopping malls, and the results were compared and analyzed. As a result of the experiment, the waste of advertising expenses was reduced through LR management as low as 13% and as much as 46% at all 5 online shopping malls participating in the experiment. ROAS also increased as low as 4% and as much as 34%. It means whole ad performance was improved through LR management. Improvements/Applications: By using LR, a new performance management index, online keyword search ads in online shopping malls will be able to improve ad performance without changing the cost of advertising.