Empirical Analysis of Search Advertising Strategies BHANU C. VATTIKONDA, VACHA DAVE, SAIKAT GUHA,...
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Transcript of Empirical Analysis of Search Advertising Strategies BHANU C. VATTIKONDA, VACHA DAVE, SAIKAT GUHA,...
Empirical Analysis of Search Advertising StrategiesBHANU C. VATTIKONDA, VACHA DAVE,
SAIKAT GUHA, ALEX C. SNOEREN
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Organic results
Sponsoredresults
Query
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Huge and growing industry
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
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10
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25
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Search Revenues ($ billions)
20%
Source: IAB/PwC Internet Ad Revenue reports
Organic
Sponsored
Brand Ad
Competitor Ad
Are common advertising strategies profitable?
Metrics for campaign analysis Click-through-rate (CTR)
Measures ability to attract users but not quality of users
Cost per acquisition (CPA) or cost per conversion:
Does not capture profitability (e.g., in case of organic results)
Profit-per-impression
Requires access to sensitive financial information from advertisers
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User Flow
Search impression
Conversion
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Search engine data User click information
Cost of a particular advertising strategy
Number of conversions that an advertiser receives
How much is a conversion worth to the advertiser?
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Value of a conversion Advertisers specify bid value for an ad
Indicates how much they are willing to spend
We assume that advertisers are rational and want overall advertising to be profitable
Value of a converison,
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Net acquisition benefit (NAB) We introduce a new metric--NAB--captures profitability of a particular strategy
Advertiser spends on a particular strategy
Leads to conversions
is value of a conversion
Profitability
, normalized for impressions
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Computing NAB
Computing NAB for a strategy requires:
1. Conversions
2. Cost of the ad strategy
3. Value of a conversion ()
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Comparing ad strategies Compute NAB for each advertising strategy
Compare NAB to see which ad strategy is more profitable
If then strategy is better than
Common ad strategies we analyze Cannibalization
Advertising for own brand name
Poaching
Advertising for a competitors brand name
Mobile ad extensions
Using ad extensions (e.g., call extension) on mobile devices
Organic
Sponsored
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Search engine dataset Month long click log data from a search engine
Billions of clicks
Millions of ads
Conversions for both ad and organic clicks
Several million dollars of ad spend
Bid that the advertiser placed for each ad click
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Advertising for own brand name Advertise for brand name
NAB is computed over search impressions where user searches for brand
name and ad is shown
Do not advertise for brand name
NAB is computed over search impressions where user searches for brand
name and ad is NOT shown
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Advertising for own brand name
Conversions •Total number of
conversions through ads and organic results
•Number of conversions through organic results
Yes, advertise No, do not advertise
•Users search for brand and advertiser ad is shown
•Users search for brand and advertiser ad is not shown
Impressions
Cost•Cost of campaign •0
Target cost𝜆 • --- but irrelevant
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Advertising on own brand name
NAB(noad)
NAB
(ad)
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Incremental benefit is limited
NAB (ad )−NAB(noad)NAB(noad)
32% advertisers net loss
Why do advertisers advertise for their brand name?
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Click-through-rate is misleading Click-through-rate not correlated to campaign performance
NAB (ad )−NAB(noad)NAB(noad)
CTR
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Summary We introduce NAB which can be used measure profitability of an ad
campaign without access to profit information from advertisers
Advertisers often target the wrong users
Common strategy of targeting own brand name can be a net loss
Commonly used metrics can be misleading
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Thank you