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eBay: Our paid Google advertising was a total waste of money

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eBay has claimed that Google's paid search ads aren't worth the money for big-name brands, after it conducted a study showing that found it was only getting 25 cents back for every dollar it spent.

eBay Research Labs looked at the online bazaar's sales after it gave up on search ads in some regions but left them on in others. According to the results, paid ads in search are only driving a negligible amount of extra revenue for the marketplace and any benefit is far outweighed by the cost of the ads.

In any Google search for a well-known brand like eBay, Amazon or John Lewis, that firm's site is going to pop up at the top of search results anyway, so an extra paid ad isn't really necessary.

The research labs economists, Thomas Blake, Chris Nosko, and Steve Tadelis, found eBay sales in places without the ads didn't really drop off. If people hadn't bought on eBay before, the ads could draw them in, but for customers who had bought from the online bazaar three times in the prior year, the ads had almost no benefit - just 25 cents in extra revenue for each $1 spent.

A spokesperson for eBay told The Reg in an emailed statement that the study wanted to find out why large firms were spending so much money on paid search.

"The test methodology used in the study analysed the true returns from this significant investment," they said. "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."

However, for smaller companies, the results would be different, because they were more likely to need a paid ad in order to appear at or near the top of Google searches, the study said.

A Google spokesman declined to comment on the eBay study specifically, but told The Reg that the company's own research had different results.

"Google's own studies, based on results from hundreds of advertisers, have found that more than 89 per cent of search ad clicks were incremental and that 50 per cent of the search ad clicks were incremental even when there was an organic search result for the advertiser in the top position," they said.

"Since outcomes differ so much among advertisers and are influenced by many different factors, we encourage advertisers to experiment with their own campaigns."

The eBay Research Labs study, presented at a National Bureau of Economic Research meeting, can be seen here. ®

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