Investigating the effect of results ranking in sponsored search

Abstract

The objective of this research was to evaluate the effect of ad rank on the performance of sponsored search advertising campaigns. In this study, we analyzed a large log file comprised of almost 7,000,000 records spanning 33 consecutive months of a search engine marketing campaign of a major US retailer. The theoretical foundation of this research is serial position effect, including both primacy and recency effects. One way ANOVA and Tamhane's T2 tests are used in this study as our analytical methods. We examined the effect of ad rank on the critical keyword advertising metrics of clicks and conversions, which translate well to the aspect of relevance in information processing theory. Findings from our research indicate that ad rank does have significant effect on both of these online advertising metrics, although it has less direct effect on conversion rates. Primacy effect was found on clicks, indicating a general compelling performance of ads listed on top positions of the first search engine results page. Meanwhile, conversion rates across all sixteen ad positions we investigated follow a relatively stable distribution, with the exception of the first two ads. Ads in these two positions generated extremely high conversion values. However, examining both clicks and conversion rates combined into a single metric of conversion potential, it is apparent that ad rank has a significant effect on the performance of keyword advertising campaigns. Ad appears at the top of the results listing have a much greater conversion potential. The research results reported in this paper are beneficial to companies using search engine marketing as they strive to design more effective advertising campaigns. Implications from this study could lead to more targeted bidding strategies and thus reduce ineffective bidding in keyword auctions.