Global online marketplace, EBay Inc has come out with a study that questions the efficacy of Google Inc's main advertising service, Google Adwords. The study analyses the relevance of the paid search ads that pop up to the right of search results and whether it is a right investment.
"The conclusion: Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels," eBay spokeswoman Johnna Hoff wrote in an email to Reuters.
Highlighting that eBay and Amazon.com Inc, that have been buying Google paid search ads may not need the service anymore due to its decreasing relevance for the company’s business. A major chunk of Google’s earning comes from advertising. The ad revenue of the search giant in 2012 stands at $46 billion, up from $38 billion in 2011.
"This has to be a major concern for Google. Strong brands like eBay, Amazon, and others need Google less and less as they have established a loyal online following. The eBay study validates this common-sense conclusion. Even at the far smaller Decide.com, we've found that buying ads on Google was not cost effective," said Oren Etzioni, an online search expert at the University of Washington and co-founder of shopping search service Decide.com.
However, Ebay's Hoff refused to reveal company’s spends on Google paid search ads. She also would not say whether eBay has cut spending on these ads, or plans to do so.
The study has been conducted by EBay Research Labs economists Thomas Blake, Chris Nosko, and Steve Tadelis analyzed eBay sales after halting purchases of some Google search ads. They kept the ads going in some regions so that they could compare results from the two different approaches. The test began in April 2012 and lasted into July 2012.
As per the study, the ads did attract some purchases by online shoppers who had not bought on eBay much. But for customers who had bought on eBay three times in the prior year, the search ads produced almost no benefit.
A Google spokesman declined to comment on the eBay study specifically. However, he said that Google's own studies, based on results from hundreds of advertisers, have found that more than 89 percent of search ad clicks were "incremental." This means that the ads generated more visits to the advertisers' websites.
