“Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment” by Steve Tadelis (UC Berkeley and eBay Research Labs), Chris Nosko (Amazon), and Thomas Blake (eBay).
The eBay team looked at the net effect of paid advertising by estimating the extent to which paid search advertising cannibalized url visits that would have eventuated by organic search anyway. It found that brand-keyword ads have no measurable short-term benefits. For non-brand keywords, it found that new and infrequent users are positively influenced by ads but that more frequent ones are not. Accounting for cannibalization takes key word purchases by eBay from being extremely profitable to loss-making. Eliminating bidding on its own brand name keywords is estimated to have saved eBay $US40 mm.
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