animesh

animesh - Quality Uncertainty and the Performance of Online...

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Quality Uncertainty and the Performance of Online Sponsored Search Markets: An Empirical Investigation * Animesh Animesh Vandana Ramachandran Siva Viswanathan Department of Decision and Information Technologies Robert H.Smith School of Business University of Maryland, College Park, MD 20742 { animesh@umd.edu , vramacha@rhsmith.umd.edu , sviswana@rhsmith.umd.edu } ABSTRACT Sponsored search mechanisms, where advertisers bid for better placement in the listing of search results on search services such as Yahoo! and Google integrate the benefits of online search with advertising, and have emerged as the dominant revenue model for online search engines. Interestingly, Yahoo! and Google employ different mechanisms to determine the placement of bidders’ advertisements. This provides an unprecedented opportunity to not only test some of the predictions of earlier research relating advertiser’s quality and their advertising intensity, in the online setting, but to also examine whether intervention by the search intermediary impacts the performance of these markets. Using data from online sponsored search auctions this study examines whether the relationship between advertisers’ quality and their advertising intensity varies across product categories as well as across the different search mechanisms. Our results highlight significant and interesting differences in the quality-advertising relationships across the two market mechanisms as well as across products characterized by differing degrees of quality uncertainty. *The authors would like to thank the NET institute for generous financial support. This paper has greatly benefited from comments from anonymous reviewers at ICIS 2006, CIST 2006, and participants at the Workshop on Sponsored Search Auctions, Vancouver, CA. We are also grateful to Carolyn Gideon, Sanjay Gosain, Nathan Larson, Ravi Mantena, and the participants at the 2006 NET Institute Conference for their insights and feedback. Danny Jamal provided valuable research assistance.
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1 Quality Uncertainty and the Performance of Online Sponsored Search Markets: An Empirical Investigation * 1. Introduction Sponsored search mechanisms, where advertisers bid for better placement in the listing of search results on search services such as Yahoo! and Google, have emerged as the dominant revenue model for online search engines. The emergence of sponsored search as a viable alternative not only to organic (algorithm-based) search but also to traditional advertising raises several issues of interest to academicians as well as practitioners. The presence of paid results in these online search engines presents a new kind of informational problem in the digital realm. An inherent conflict of interest arises in the sponsored search (also known as paid- placement or keyword advertising) context, where information intermediaries deliver information about sellers and their offerings, but are paid by those same sellers they “certify” (Gaudeul 2004). On the one hand
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This note was uploaded on 12/08/2011 for the course CIS 620 taught by Professor Cis620 during the Fall '08 term at UPenn.

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animesh - Quality Uncertainty and the Performance of Online...

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