As advertisers have begun adapting to the internet, paid search ads have become a common way for businesses to advertise to potential customers. Specifically, Google has pioneered the paid search ad category for search engines, giving advertisers an easy way to show up in search results without gaining the popularity that would rank them higher in natural search results.
As common as paid search ads are, a new study has now shown that they may not be as effective as advertisers assume they are. The study, conducted by economists at the University of California - Berkeley, found that paid search ads may not affect sales at all.
The study's authors worked with eBay to test the effectiveness of paid search ads. In 68 "direct marketing areas of the U.S.," eBay paid search was completely turned off. After 60 days the researchers compared the sales of groups that had no paid search ads placed and those that did have paid search ads. The researcher later also tested eBay's paid keyword searches, turning them off and then comparing sales data. They found no measurable impact on sales from paid search advertising.
"We found that when you turn off the paid advertising, almost all of the traffic that came through the paid search is just substituted by the other free channels," said Steven Tadelis, associate professor at the Haas School of Business at Berkeley. "If advertising is indeed a strong driver of sales, we should have seen sales plummet. But the impact on sales was indistinguishable and not significantly different than zero."