EBay study questions value of Google's main ad service

EBay study questions value of Google's main ad service(reuters.com)

29 points by tucson 13 years ago | 29 comments

sounds 13 years ago |

I should disclose that I haven't shopped on eBay in many years.

Here's why, and why it's relevant:

I have a terrible experience on eBay.

The prices are great until the excessive shipping is added. Until payment I can generally get a response from the seller but after that it's like I don't exist. Then there are the outright scams.

And please note, I'm a _buyer_. I shudder to think that I should ever be a seller on eBay; sellers are left empty handed if a buyer claims "not as described." Example: http://www.cbsnews.com/8301-501465_162-57352136-501465/paypa...

When I try to shop for something online, even adding "-eBay" to a google search to drop eBay listings can be risky (it will eliminate any page that mentions eBay).

I believe this is relevant because the study is basically claiming eBay is well known enough that they don't need to advertise on Google. I'd argue exactly the opposite is happening: eBay is hemorrhaging users and a successful marketing campaign could change that. eBay needs Google more than Google needs eBay.

Amazon (mentioned in the article) and Apple are definitely innovative in the retail space. I notice they focus on targeted ads more than eBay does, because eBay's model is more hands off. And I think a direct consequence is Amazon and Apple can make good use of Google ads.

There's nothing wrong with "hands off" automation of big parts of your business. It works for Google.

But I can't really take eBay's study very seriously: if there are lots of customers and businesses who have grown tired of eBay (and PayPal), their advertising has got to be hurting.

Straighten out your house, eBay, and then people will want to stop by.

leoedin 13 years ago | |

I've had a completely different experience. I tend to buy "buy it now" items, particularly electronic items, regularly from ebay. I don't think in perhaps 7 or 8 years of regular ebay purchases (probably between 1 and 10 a month) I've had more than a few issues. Sometimes things get lost in the post (especially if the seller is based in China or Hong Kong), but they're often quite apologetic about it and often send another one if it never arrives.

It may be that in the past postage costs were hidden, but they've made it very clear now. The buyer pays the price + postage, both of which are clearly visible on the search page and repeated on the item and purchase page.

eBay is fantastic for small electronic components. If you need a couple of capacitors or a single (popular) chip, the price + postage is always considerably less than buying from a mainstream retailer (where £10+ postage for anything is the norm). My experience is in the UK, so elsewhere may be different.

Spooky23 13 years ago | |

I agree, eBay basically shares all of the bad aspects of a flea market with the faceless bureaucracy of the DMV. eBay cannot effectively police it's environment, and it's fee structure is outrageous.

If I want to deal with sketchy people to save a few bucks, Craigslist lets me do that with a higher chance of a positive outcome for $0.

Also, you can exclude ebay from search results by entering "-site:ebay.com"

sounds 13 years ago | | |

Thanks for the "-site:ebay.com"

I started with a longer paragraph there, talking about how annoying it is to go on google shopping, find a great price, then look to the right. Oh, eBay.

Then I edited down my wall of text.

Karunamon 13 years ago | |

I agree on pretty much everything you said (especially wrt: selling.. if you're not a medium-ish business with that as your function, you need your head examined if you decide to roll with ebay!)

That said, the whole "excessive shipping" thing is primarily used by unscrupulous sellers to skirt around ebay's fees. It also used to be used to appear higher in search results when sorted by price, until they started including shipping in that column. It's the reason you see a small widget like a laser pointer for a penny with 9.99 shipping.

You can report any listings like that and they'll get yanked for it.

And there's the little fact that the world's worst auction site and the world's worst payment provider are surgically joined at the hip..

UnoriginalGuy 13 years ago | |

Can I just bring up etsy here?

It seems to me that eBay's most dangerous competition is etsy along with perhaps Amazon's "sellers."

You have etsy eating most of eBay's "we make it ourselves" market and you have Amazon which lets people buy "new" goods cheaper with less hassle than the eBay/PayPal mess.

You also have Craigslist going after eBay local...

The only niche eBay really has right now is cheap Chinese/HK direct imports and goods which are borderline legal (and Amazon would likely pull, like knives).

If someone steals that market form them then they might be in real trouble. Even my mom who is in her 50s uses Amazon to sell used books instead of eBay - easier she says.

duskwuff 13 years ago | | |

Etsy really isn't competition for eBay, at least unless they change their policies significantly. They explicitly ban mass-produced items.

potatolicious 13 years ago | |

Ditto, I haven't gotten anything off eBay in ages. The last time I did was from a guy who made his own camera grips and, for some reason that I will never understand, exclusively uses eBay to sell his goods.

My other problem with eBay is that in some categories the pricing is just wholly unrealistic. Specifically used/vintage cameras - the initial and ending prices on these items on eBay is often much higher than what the same cameras are trading for on enthusiast forums. The demographic of people collecting these on enthusiast forums vs. those buying the same items on eBay is clearly different.

hluska 13 years ago | |

I tried selling with eBay and didn't have a whole lot of luck. I never actually received a bid and felt like I was paying fees to become a target of phishing scams...

Without hyperbole, I'd rather set up shop on a blanket on the sidewalk than do business with eBay.

daigoba66 13 years ago | | |

Years ago I tried selling a laptop on eBay. The "winner" ended up being someone trying to scam me by having me ship before paying or something, I don't completely remember.

Anyway, the worst part is that eBay collected the listing fees before the auction was handed over to the fraud dept. I got my fees refunded, but in the form of credit. So now every month, for the past 10 years or so, I get a e-mail from eBay reminding me of my current account balance of -$26 and change.

lingben 13 years ago | |

I just used eBay for the first time! you can rank products based on price+shipping, or just price. found it very useful

nolok 13 years ago |

A bit of a misleading title. Ebay is questioning whether an big established, household brand like them still need to pay ads in Google search, because those users would come to them anyway.

In the same vein, google search ads probably have low value for facebook too.

netrus 13 years ago | |

I could imagine a user using Google just to circumvent the category hierarchy of a site like Ebay, e.g. searching for "Ebay washing machines". If this user clicks an ad on the result page, it is super painful for Ebay.

OGinparadise 13 years ago | | |

It may have to do with search boxes being built in browsers already. Type and search, instead of going to ebay and then type-search. eBay may be bookmarked but it's still not as easy to pull up as searching from a browser's window.

makomk 13 years ago | |

Ebay's taken a bit of a scattershot approach to advertising on Google from what I can tell - they seem to have bought ads for a huge number of almost random keywords.

andrenotgiant 13 years ago |

Link to the actual research paper: http://conference.nber.org/confer/2013/EoDs13/Tadelis.pdf

(preliminary paper published and presented at the March 8 NBER "Economics of Digitization" Conference)

As a side note, you know an article (reuters) is dumbed-down linkbait when they don't even bother linking to the actual study they are referencing.

qompiler 13 years ago | |

> Results show that brand-keyword ads have no short-term benefits, and that returns from all other keywords are a fraction of conventional estimates.

The article on reuters completely ignores the keyword 'short-term'. Furthermore, if eBay had an actually viable competitor it would be fighting for those ads with every penny.

hluska 13 years ago |

So, a big company with a strong brand that a lot of people recognize did a study to see how effective their PPC ads are. During the course of this study, they discovered that buying these ads didn't cause an appreciable increase in sales...

Consumers go through stages until they finally adopt your product (if they ever do). In the beginning, they have never heard of you, so they certainly can't become customers. Then, they gain some basic awareness that you exist. Once they gain some basic awareness, some may choose to learn more about you. And, after they gain more knowledge, some people will choose to make a trial purchase. Finally, if your product/service is good (and the experience is good), some consumers will choose to adopt your service - they will become long term customers (and a good source of word of mouth)...

I'd argue that PPC is great for awareness, knowledge and even (maybe) convincing people to make a trial purchase. But after that, the company itself has to provide a good service. Further, it's rather obvious that once the marketplace knows that you exist and knows a bit about you, you won't gain as much from this type of advertising...

ChuckMcM 13 years ago |

I think this tells a more nuanced story than just "clicks aren't worth it."

Search advertising has been very lucrative for a lot of people, this was especially true when there were few contested keywords and the cost to land on a page was low by comparison.

However, if you look at Google's results over time, they grew spectacularly as they added advertisers and their price per placement was growing. Then the growth of advertisers slowed because there are only so many of them in the world, and in their latest results you can see that the price per click has stabilized (and declined slightly) as well. Both of those point to a maturing of the search advertising market.

My guess, and it's only a guess, is that Google's revenue from search ads has peaked. (Peak Ads anyone :-)) and going forward the dynamics of that market will be a lot more subtle. More complex advertising packages will be created that increase the total number of pages where ads are shown but do so in a way that spreads cost around (like discounting a front page add if enough "page 3" ads are bought at the top of that page).

rfergie 13 years ago |

I have run similar tests myself for a variety of clients.

Some end up with the same result as ebay; brand terms generate sales, but the incremental value of this is not worth the media spend.

For others, brand search advertising is a complete no brainer and they make a lot of money doing it.

gav 13 years ago | |

It really depends on the market. I've found that brand terms can convert really well if you can drive them to a targeted microsite or similar segmented area. Usually it means that the customer is far down the purchase funnel, a search for "washing machine" may be just research, "whirlpool washing machine" can mean the brand part of the decision is already made ("whirlpool duet" is even better).

rfergie 13 years ago | | |

When I say "brand terms" I mean queries for the site's own brand. For example "washing machines on ebay". I've never seen these keywords not convert well; the question is how many of these people would convert anyway even without the advert.

ecolak 13 years ago |

This is not news, this is something very basic related to direct navigation traffic vs. paid traffic. If 50% of traffic is through direct navigation (ppl typing www.yourcompany.com on their browser to land on your site), and Google ads can bring you the other 50%, then that's great, otherwise not. Saying that people would've come anyway sounds amateurish and easy to measure. Stop buying ads and compare your traffic to your prior traffic. Direct nav. traffic for big brands such as Amazon and Ebay is around 50% of their total traffic, so obviously they benefit less from Google ads then companies whose direct nav. traffic is 5%...

mistercow 13 years ago |

The problem with this kind of analysis is that it's to short-sighted. The main benefit of advertising has never been direct conversions. Rather, the main benefit is keeping the brand in people's minds, so that they'll be more likely to come to you in the future.

When Coke buys a commercial slot on a TV network, do they expect someone to say "Holy crap, I need to drink a Coke right now!", turn off their TV, and drive to the grocery store? Of course not. They're playing a longer game than that.

This is also why the PPC model for internet advertising is totally broken.

wildwood 13 years ago | |

The PPC model is essentially the same model as Direct Response Marketing, just more fine-grained.

Both of these, if used properly, can make insane amounts of money for a company. And, if used improperly, they are little more than a money sink.

codex 13 years ago |

Think Google ads don't matter? Stop advertising and wait for an upstart competitor to gain a foothold through those empty slots.

OGinparadise 13 years ago |

Ironically, Google has been pushing brands way up in search for 4-5 years now, and it may come back to bite them. Many said it was due to brands being more profitable for Google, but long term it builds brands to the point of users bypassing Google. Ah the challenges of being both an 'impartial' judge of content and the world's largest ad engine.

Another thing is the price, it has skyrocketed lately. What may have made sense at $0.40 a click, no longer does at $2 a click.

andrenotgiant 13 years ago | |

I think there is more to "Google and Big Brands" story than what you have mentioned.

1. "Google has been pushing brands way up in search for 4-5 years now" - True, but it's important to note this is not a result of Google deciding "let's promote brands", it's a result of Google's algorithm improving. Google looks at query chains, sees that people hit certain sites after a few unsuccessful broad searches, and thus improves the broad search rankings of those sites. It is no coincidence that a significant portion of these "certain sites" happen to be big brands, which leads to point 2.

2. Brand advertising creates affinity - As Eric Schmidt put it: "Brand affinity is clearly hard wired." People end up at brand sites at the end of query chains because they recognize them, they trust them more, or they are just more familiar with them.

3. Google has lots of Brand advertising space - A quick review of the numbers of any Big Brand's SEM program will show some really abysmal inefficiencies and totally unnecessary bias towards branded searches (that's another problem altogether.) But the point is, Big Brands don't care if they could turn off Paid Search Ads in some areas and get the same ROI through other channels, they want to buy ads to signal they are a big brand, to saturate your vision with their brand and create the above mentioned affinity and familiarity.

Thus the cycle continues and Google has nothing to worry about with regards to big brands lowering Paid Search spend.