The impact of ad positioning in search engine advertising: a multifaceted decision problem
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The impact of ad positioning in search engine advertising: a multifaceted decision problem Carsten D. Schultz1
© Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract A general desire in search engine advertising is to rank at the topmost position for maximum attention. Based on a search engine advertising campaign, this study provides empirical evidence that this approach does not necessarily maximize sales. The analysis reveals relationships that result in a non-linear rank profitability. As a consequence, advertisers face the multifaceted decision problem of identifying the optimal rank for their search engine advertisements. The outcome of the advertising activity is determined by three dimensions: the number of prospects (quantity), their acquisition costs (price), and their quality, i.e. is the likelihood to result in sales revenue. The results also differ if evaluated on campaign or keyword level. Consequently, research and practice have to consider the effect of a non-monotone rank profitability in search engine advertising, which has been neglected in previous studies. Furthermore, the differences on campaign and keyword level affect the evaluation and corresponding decisions when managing search engine advertising. Keywords Multifaceted decision problem · Rank profitability · Search engine advertising
1 Introduction Search engine advertising has become one of the dominant forms of online advertising. According to the Internet Advertising Bureau, search engine advertising accounted for US$40.6 billion in the USA in 2017, an increase of 17.5% compared to 2016 (US$34.6 billion) [29]. After consumers enter a search query, internet search engines, such as Bing or Google, usually display advertisements above, alongside, or below the search results of their proprietary algorithms. For these search engine advertisements, advertisers bid a value that they are willing to pay for each click on their advertisement. These advertisements are then positioned according to an * Carsten D. Schultz carsten.schultz@fernuni‑hagen.de 1
University of Hagen, Universitätsstraße 11, 58097 Hagen, Germany
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automated generalized second-price auction [19, 69]. From the consumer perspective, search engine advertising is a useful form of advertising, because the keywords and the ad message are matched according to the search query. For advertisers, search engine advertising represents an opportunity to selectively reach the target group at a point in time when the potential consumers are already thematically involved and activated. Corresponding to its evolution into one of the dominant forms of online advertising, search engine advertising has become the subject of increasing research interest over the last decade. Researchers have investigated search behavior [37, 39], multiple aspects of auction mechanisms [19, 69], keyword generation and selection [15, 45, 58], click fraud [46, 71], and the integration of search engine advertising into the marketing mix [13, 41, 56
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