20091125 Newsletter – Study Finds Organic Results Increase Paid Search Clicks

A study from a couple of NYU Stern professors has found that organic search engine results can play a direct role in whether or not a paid listing is clicked. Basically, if this research is any indication, if your business has both a paid result and an organic result appear at the same time, you have a better chance of your paid result getting clicked than if the organic result had not appeared.

Professors Anindya Ghose and Sha Yang have highlighted the following findings:

• On average, the impact of organic listings on paid advertising is 3.5 times stronger than vice-versa, possibly because of the tendency of consumers to trust organic listings more than paid ads.
• The positive association between paid and organic listings increases advertisers’ profits by at least 6.15% when compared to profits in the absence of either of them. The positive association is strongest when advertiser-specific keywords are used and weakest when brand-specific and generic keywords are used.
• Click-through rates, conversion rates and total revenues are higher when both paid and organic listings are present simultaneously than when paid search ads are absent.
• The combined click-through rates are 5.1% higher when paid and organic listings are present simultaneously than when only the organic listings are present.
• The combined conversion rate increases 11.7% when paid and organic listings are present simultaneously than when organic listings alone are present.
• Paid search advertising drives up to 54% of total revenue growth.

The professors used “a unique panel dataset of consumer responses to keyword ads on Google” to conduct their research. The complete findings from the study are evidently available in a paper entitled “Analyzing the Relationship between Organic and Sponsored Search Advertising: Positive, Negative or Zero Interdependence?” It’s 52 pages long.

“These findings have important implications for the incentives of search engines to strategically modify the rankings of their organic search listings in order to boost their revenues from paid search advertisements,” says Professor Ghose.

Ghose’s point is an interesting one. Nobody’s making any accusations here, but would search engines tweak organic results specifically with the goal of increasing the performance of paid results, and bringing in more revenue?

Some think the idea is absurd. For example, one WebProNews reader commented:

No additional CPC is incurred when an organic listing is present, and the CPC certainly does not change depending on the organic listing’s position. The PPC auctioning process has nothing to do with the organic SERPs.

Lastly, manipulating the organic SERPs in order to charge more for PPC clicks is cutting your own throat, from an SE perspective. In effect, telling advertisers: “You got a better organic position, therefore you will be charged more for your PPC clicks.” Under which business model does this make sense? Exactly none.