How Does the Use of Trademarks by Third-Party Sellers Affect Online Search?
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ARTICLE SUMMARY
This paper examines the effects of trademark use in advertisements by third-party resellers.
POLICY RELEVANCE
Restricting the ability of third-party resellers to use trademarks of the products they resell in online advertisements is unlikely to benefit trademark holders.
KEY TAKEAWAYS
- Firms may sell products to consumers directly while simultaneously allowing third parties to sell their goods to consumers.
- For example, you might buy a flight directly from Delta, or book through Expedia.
- Permitting third-party sales entails tradeoffs. Although allowing third parties to sell one’s goods does increase sales, third party firms usually charge an agency fee, and consumers may be exposed to competing goods.
- For example, you might buy a flight directly from Delta, or book through Expedia.
- Both the direct seller and indirect sellers can purchase search ads, and for the same key search terms; so, for a particular search term, a firm may be competing with its agents in the advertising space.
- In 2009, Google controversially mandated that trademarks can be used in advertisements by firms other than the trademark holder.
- The legal environment on trademark use in advertising and advertising purchases is not settled in the United States and Europe.
- After enacting this policy change, many third-party advertisers began using trademarks in their advertisements.
- The legal environment on trademark use in advertising and advertising purchases is not settled in the United States and Europe.
- Surprisingly, trademark holders in the industry examined in the paper—the hotel industry—benefitted from the policy change.
- Trademark holder advertisements received fewer clicks.
- However, consumers seemed to start ignoring advertisements in favor of clicking on the search result for the trademark holder’s website.
- Trademark holder advertisements received fewer clicks.
- The use of trademarks in every advertisement led them to become indistinct and less effective in attracting consumers.
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About Catherine Tucker
Catherine Tucker is the Sloan Distinguished Professor of Management and Professor of Marketing at Massachusetts Institute of Technology Sloan School of Management. She is also Chair of the MIT Sloan PhD Program. Her research interests lie in how technology allows firms to use digital data to improve their operations and marketing and in the challenges this poses for regulations designed to promote innovation. She has particular expertise in online advertising, digital health, social media and electronic privacy.
