Electronic Commerce Research and Applications
An analysis of the importance of the long tail in search engine marketing
Introduction
The market for search engine marketing continues to grow steadily throughout the world. Expenditures on search engine marketing in 2009 were $10.7 billion in the US alone and thus account for 7% of the total online advertising spending in the US (IAB 2010). Hence, search engine marketing is currently the most popular form of online advertising. It allows advertisers to place text ads that depend on the keywords entered in a search engine. These ads are linked to advertisers’ websites, which hold further information related to the entered search keywords.
In Fig. 1, for example, the user entered the search keywords “two-way radios” into Google’s search engine. The user receives then two different results from the search engine provider: the lower, left-hand part of the screen shows the unsponsored, organic search results, whose ranking is driven by the relevance that the search algorithm assigns to these results. The other parts on the top and the right side of the list present ads known as sponsored search results. The display of the unsponsored search results is free of charge, whereas advertisers pay for each click on their ads in the sponsored search results. The ranking of these ads is the result of keyword auctions for which the advertisers need to submit bids for the price per click that they are willing to pay. For more details on keyword auctions, which also uses weights to reflect differences in the quality of the ads, see Edelman et al. (2006) or Varian (2006). In the example of Fig. 1, ads ranked 1 and 2 are above the unsponsored search results, and the ads ranked 3–7 are on the right side of the search results. Generally, the leading ranks draw the most attention of the users and are therefore most preferable, and thus these ranks are sold to the bidder with the highest (weighted) bid. Hence, higher bids lead to higher and thus more attractive ranks, more awareness, more clicks and hence very likely to a higher number of acquired customers (Hotchkiss et al. 2005). However, the prices per click on those ranks are also higher, which leads to higher acquisition costs per customer.
The number of keywords that advertisers might use is rather unlimited, and it is tempting to presume that the long tail, defined in this research as the many keywords that are available for search on the Internet, is also fairly important in search engine marketing. Anderson (2006) coined the phrase to describe the phenomenon that niche products can gain a significant share in total sales. In line with this idea, online advertising agencies and bloggers now also claim that search engine marketing campaigns need to have hundreds or thousands of keywords because the long tail, that is, the many less popular keywords, drives success in search engine marketing.
The primary motivation of this research is that we doubt the importance of the long tail in search engine marketing. Thus, we believe that the set of keywords required to successfully run search engine marketing campaigns can be fairly small so that the management of search engine marketing campaigns is easier than many online advertising agencies claim. Therefore, the aim of this paper is to examine the importance of the long tail in search engine marketing. Stated differently, we would like to study whether the use of many different keywords drives the success in search engine marketing or whether this success is driven by a few but important keywords. To accomplish this, the remainder of this paper is organized as follows. Section 2 provides an overview about search engine marketing and Section 3 discusses the idea of the long tail phenomenon and its relevance for search engine marketing. Section 4 describes the set-up of the empirical studies and Section 5 presents their results. We conclude in Section 6 with a summary of our findings.
Section snippets
Search engine marketing: an overview
Search engine marketing is by far the largest source of revenue for Google (Edelman et al. 2006), which is the market leader of search engine providers in most Western countries, usually clearly ahead of Yahoo and Microsoft (Ghose and Yang 2009). The display of the unsponsored (organic) search results is free of charge, whereas advertisers pay for each click on their ads that appear among the sponsored (paid) search results. Typically, the term “search engine optimization” labels efforts of
Long tail and search engine marketing
The phrase “long tail” became popular with the best-selling book of Anderson (2006) and, more generally, describes the phenomenon that the distribution of demand across products has shifted away from blockbuster products to niche products. This idea builds upon work by Brynjolfsson et al. (2003), who show that a large proportion of book sales come from books that are not frequently purchased. There is an under-exploited spectrum of customers’ tastes to which pre-Internet retailers could not
Description of empirical studies
We used data of search engine marketing campaigns from three firms of two European countries (Germany and Spain) that cover 36 weeks from August 2007 to April 2008 in two different industries. The first campaign, “Travel 1”, was conducted in Germany and aimed at selling boating vacations. The second campaign, “Industrial Goods”, was run in Spain and used ads to draw interest for industrial goods such as industrial weights. A third campaign, “Travel 2”, was carried out in Germany and was intended
Distribution of searches and clicks across keywords
In line with previous research on the long tail (e.g., Brynjolfsson et al., 2003, Brynjolfsson et al., 2007, Ghose and Gu, 2006, Hervas-Drane, 2007), we use different measures to assess our Proposition 1, based on the concentration of searches and clicks across keywords. In particular, we calculate the share of the top 20% and top 100 keywords in the total number of searches, the total number of clicks, and the Gini coefficient. Table 2 provides the results for each of the three campaigns. We
Conclusion
Since Anderson (2006), the term “long tail” has enjoyed huge popularity, and advertising agencies and bloggers claim that the success in search engine marketing is driven by the long tail, which we defined in this research as the many less popular keywords entered by users to search the Internet. Advertising agencies have strong incentives to argue that search engine marketing campaigns need to have hundreds or thousands of keywords. The results of our empirical studies, however, tell a
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