ebay to Google: "We don't need you. No established online brand does"

OH MY there's a bit of a tiff erupting between the big online players, as EBay Inc one of the largest online marketplaces just released a study that questions value of Google's main ad service. Established brands such as eBay, Amazon et al don't get more customers from paid search results than they otherwise would have. They have an online following that they already sell to, and online marketing channels doesn't bring in new customers, just the one who would have searched eBay anyway.

"The conclusion: Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels," eBay spokeswoman Johnna Hoff wrote in an email to Reuters on Tuesday.
The study highlights a potential problem for Google, which generated $46 billion in ad revenue last year, up from $38 billion in 2011.
Some leading e-commerce companies, such as eBay and Amazon.com Inc, that have traditionally been big buyers of Google paid search ads may not need the service as much anymore.
"This has to be a major concern for Google," said Oren Etzioni, an online search expert at the University of Washington and co-founder of shopping search service Decide.com.
"Strong brands like eBay, Amazon, and others need Google less and less as they have established a loyal online following," he added. "The eBay study validates this common-sense conclusion. Even at the far smaller Decide.com, we've found that buying ads on Google was not cost effective."

Buy ads on google is not cost effective? Really now? Did eBay Just Prove That Paid Search Ads Don't Work? to borrow Rob Fisherman's succinct headline in the Harvard Business review Blog. TL;DR - kinda. It'll work for some smaller brands, in smaller markets. It'll work when targeted correctly.

The larger lesson from eBay's experiment is about the importance of questioning conventional marketing wisdom. As much as the internet has given companies opportunities to target their ads, it's also given them a ready testing ground to experiment with different business practices to see what really works.

Still, as the worlds largest advertising agency moves from ads to tech (Glass anyone? No, how about a talking shoe or a Chromebook?), we're beginning to wonder if Google is going to grow into the worlds largest in house ad agency & production company and R&D department, whilst simultaneously building the future Amazons, Entertainment channels (*coff*Youtube*coff*) and eBays of the world... Hold me, I'm scared. (PS Hire me Google, I give. You win.)

Ebay have 372386 plusses on G+ while Adland has a puny 237 aw shucks way to make me feel small...

about the author

Dabitch Creative Director, CEO, hell-raising sweetheart and editor of Adland. Globetrotting Swede who has lived and worked in New York, London, San Francisco, Amsterdam, Copenhagen and Stockholm.

Comments (7)

  • Hurricane Bristol's picture
    Hurricane Bristol (not verified)

    I thought the thrust of the criticism had been on buying brand match terms, and I've never really understood why anybody would feel the need to buy Adwords against their own company name anyway. If people are searching your company name why would you want them to click a link that will cost you money when they're going to visit your site regardless.

    Mar 14, 2013
  • Tom Megginson's picture
    Tom Megginson (not verified)

    Well fucking put.

    Mar 14, 2013
  • Dabitch's picture

    Matching brand terms? Yes, the first things they looked at was just that, here's the preliminary study : "Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment", but another thing they were looking at was SEM for non-branded keywords.

    The non-brand keyword experiments show that SEM had a very small and statistically insignificant effect on sales. This suggests that on average, U.S. consumers do not shop more on eBay when they are exposed to paid search ads on Google.
    To explore this further, we segmented users according to the frequency at which they visited eBay the year before the test. We find that SEM accounted for a statistically significant increase in new registered users and purchases made by users who bought only one or two items the year before. For consumers who bought more frequently, SEM does not have a significant effect on their purchasing behavior. We calculate that the short-term returns on investment for SEM were negative because more frequent eBay shoppers are accountable for most of paid search sales.

    Mar 14, 2013
  • Victor Pan's picture
    Victor Pan (not verified)

    Actually... the economists at eBay missed a huge point - they're spending a ton in advertising and most of the ads suck. You can read more about that here.

    I trust their methodology and their intent to find out whether there's an overlap - but they're missing the point on ad efficiency - it's not just a matter of it being there or not. It's also a matter of how good the ad is.

    Mar 14, 2013
  • Dabitch's picture

    While I would be perfectly happy to agree with your main point, that if the ad sucks it won't work, I'm still seeing this as Bad News™ for Google. The 25 page report has som damning points made in it, and I suggest those interested have a good read of it regardless. We might learn something.

    Retail sites, including Amazon dominate paid search advertising on Google, and by paid search ads, I mean the stuff you see in this screenshot (below). Of coourse the key words chosen will be important. DKI (Dynamic Keyword Insertion) backfires as often as dynamic banner insertion based on keywords do, and the screenshots used in that post you linked to, while hilarious, are really ancient. You won't find babies for sale on eBay today if you search google for "baby".

    Speaking of the brand names, it always seemed to me a huge waste to buy "Amazon" as a keyword so that when someone searches "Amazon DVD" the ad displayed underneath is a link to Amazon books (yes, that's a live example I just found by googling "Amazon DVD")

    Mar 14, 2013
  • Philip Cohen's picture
    Philip Cohen (not verified)

    The findings of this study may well be valid for very well known brands, but the report suffers one very serious material flaw, it is an eBay document—undoubtedly, straight from the disingenuous eBay Dept of Spin—and should therefore be taken with a grain of salt … Regrettably, you can always tell when an eBay/PayPal spokesperson is being disingenuous—their lips are moving!

    And, the ugly reality for consumers dealing with the clunky, unscrupulous eBay/PayPal complex ...

    "eBay-Facilitated Shill Bidding Fraud on eBay Auctions: Case Study #5" ... http://www.ecommercebytes.com/forums/vbulletin/showthread.php?p=167554

    Mar 16, 2013
  • Dabitch's picture

    I de-"bitly"-fied your link as this is not Twitter™ (don't get me started on .ly domains, I have a bad .tm experience )

    Mar 16, 2013