Advertiser Prominence Effects in Search Advertising

Search advertising is the ordered list of advertisements that appears when a user searches for something in an online search engine. By construction, these ads differ in prominence: ads higher up the list are more prominent than ads lower down the list. However, search ads also differ in prominence in another way: prominence of advertiser. This paper examines how these two types of prominence interact in determining the click-through-rate of these ads. Using individual-level click-stream data from Microsoft’s Live Search platform, and measures of advertiser prominence from Alexa.com, we find that ad position and advertiser prominence are substitutes. Specifically, in searches for camera brands, a retailer not in the Top-100 of Alexa rankings has a 30–50% higher click-through-rate (CTR) in position one than in position two, whereas a retailer in the Top-100 of Alexa rankings has only a 0–13% higher CTR for the same position improvement. Qualitatively similar results are obtained for several other search strings. These findings demonstrate, first, that advertiser brand matters even for search ads, and, second, the way it matters, is the opposite of what is usually assumed in the theoretical literature on search advertising.