Working Paper 2009
This paper looks at how consumers respond to different online ads, and how consumer benefits vary.
Different systems for choosing ads to display on a page can increase or decrease how useful the ad is to consumers.
- Search engines display online ads to users. The placement of the ads on the page depends on how much advertisers have bid to have their ad associated with the keyword the user chooses.
- Advertisers and bids constantly change, so the same search will tend to display a very different array of ads over time.
- The data is from Microsoft’s Live Search, which has 9.1% of the U.S. online search market and about 900 million searches per month.
- 47% of users do not click on the ads in the order they display.
- 57% of users clicked on only one ad. User satiation by the first ad reduces second clicks more than users’ discovery that ads are relevant.
- Users are reluctant to click on lower ads, but we do not know why.
- Users are uncertain which ad to click; reducing uncertainty by adding more descriptions or ratings to results would benefit consumers and would not reduce click-through rates.
- Click-through rates tend to increase when ads are ranked by quality; ranking an ad about which users are uncertain more highly makes it easy for users to click and learn if it is relevant.
- Targeting ads to users based on their browsing history or demographics (“first-best” targeting”) could benefit consumers significantly.