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Are consumers averse to sponsored messages? The role of search advertising in information discovery

Author

Listed:
  • Navdeep S. Sahni

    (Stanford GSB)

  • Charles Zhang

    (Stanford GSB)

Abstract

We analyze a large-scale randomized field experiment in which a search engine varied the prominence of search ads for 3.3 million US users: one group of users saw the status quo, while the other saw a lower level of advertising (with search ads sidelined). While lowering advertising significantly decreases the search engine’s revenue as expected, users exposed to the decreased level of advertising also decrease their overall search engine usage. This reduction is more significant among multi-homing users. On the supply side, going from the status quo to lower level of advertising decreases traffic to newer websites, with the newest decile losing traffic by 10%. Overall, our data suggest that viewing search ads makes consumers better off at the margin we study. We illustrate a constructive role of search advertising where advertising fills significant information gaps by conveying new information that is difficult for the search engines to gather and therefore missed by their organic algorithms.

Suggested Citation

  • Navdeep S. Sahni & Charles Zhang, 2024. "Are consumers averse to sponsored messages? The role of search advertising in information discovery," Quantitative Marketing and Economics (QME), Springer, vol. 22(1), pages 63-114, March.
    • Handle: RePEc:kap:qmktec:v:22:y:2024:i:1:d:10.1007_s11129-023-09270-z
    DOI: 10.1007/s11129-023-09270-z
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    References listed on IDEAS

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    More about this item

    Keywords

    Search advertising; Search engine; Advertising effects; Marketing; Media economics;
    All these keywords.

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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