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2 LITERATURE REVIEW
There are two streams of research which are
important for our work. The first studies bidding
behavior of competitors in sponsored search. The
second stream – blended search – analyses user
preferences for organic and sponsored results as well
as the interactions between them.
2.1 Brand Bidding and Piggybacking
Although brand terms bidding behavior is of great
relevance in business practice, there have only been
very few scientific publications on the topic. As a
first step, a distinction has to be drawn between the
bids on the own brand and those on other companies
brands. Previous research on sponsored search brand
keyword advertising by Jansen and Rosso (Rosso
and Jansen, 2010a), which was based on the global
top 100 brands included in the well-known WPP
BrandZ survey, reveals that 2/3 of the brand names
examined were used by other firms while only 1/3 of
the brand owners analyzed advertise in the context
of their own brand names on SERPs. Bidding on
other companies’ brand names is referred to as
piggybacking, for which three different types of
motivation have been isolated: (i) competitive:
piggybacking by an obvious, direct competitor; (ii)
promotional: e.g. by a reseller; and (iii) orthogonal:
e.g. by companies that offer complementary services
and products for the brand owners’ products. While
retail, fast food and consumer goods brands are
greatly affected by piggybacking, this practice is
rarely observed in the field of luxury brands and
technology (Rosso and Jansen, 2010a; 2010b).
The Assimilation-Contrast Theory (ACT) (Sherif
and Hovland, 1961) and the Mere Exposure Effect
(Zajonc, 1968) are models that offer an explanation
of the circumstances under which bids on one’s own
or third party brand names could be economically
valuable. In sponsored search advertising the use of
other companies’ brand names seems to be
advantageous when the perceived difference
between the own and other brands is low from a
user’s point of view (ACT), while the value of
bidding on own brand terms depends on the degree
of the Exposure Effect, i.e. the display frequency
that a brand needs in order to influence the
purchasing decisions of users positively. Until now
the empirical validations of these models for brand-
bidding have been based on user surveys (Shin,
2009) and can therefore be subject to the problem of
method bias. However, for the first time we are able
to present results that are based on data that were
collected in a non-reactive setup.
2.2 Blended Search
From the search engines’ perspective, the question is
about the extent to which the free presentation of
results in the organic part of the SERP counteracts
their own financial interests in sponsored search as
they generate essential parts of their profits in this
area (Xu et al., 2009). While a high perceived
quality in the organic search results helps search
engines to distinguish themselves from their
competitors and to gain new customers, it is exactly
this high quality in the organic results that may lead
to cannibalization effects between organic and
sponsored results (White, 2008).
From the users’ point of view, the question has to
be asked which preferences and intentions they have
when making their choice whether to use organic or
sponsored results. Depending on their personal
experience of this particular advertising channel and
their motivation to search, Gauzette (Gauzente,
2009) shows that consumers do not only tolerate
sponsored search as just one more channel for
advertising on the Internet but do sometimes even
consider these sponsored results more relevant than
the organic ones. This is particularly true for
transactional-intended queries, i.e. the so-called
commercial-navigational search, in which the search
engine is used instead of manually typing the URL
into the browser’s address bar. The same strong
preference for sponsored results can also be found in
the context of, for advertisers even more attractive,
commercial-informational queries where users,
although they have a strong intention to buy, are
nevertheless still looking for the best matching result
for their specific commercial interest (Ashkan et al.,
2009).
Along with the multiplicity of intentions that
individual users have when typing queries into
search engines, there are significant variances of key
performance indicators (KPI) that search engines
and advertisers pay attention to. Ghose and Yang
(Ghose and Yang, 2008) compare organic and
sponsored search results in respect to conversion
rate, order value and profitability. In fact, the authors
note that both conversion rate and order values are
significantly higher through traffic that has been
generated by sponsored search results than those
generated by visitors that have clicked on organic
results. It seems that the combination of relevance
and the clearly separated presentation of organic and
sponsored results as well as their explicit labeling
are factors that lead to a greater credibility of the
SHOULD COMPANIES BID ON THEIR OWN BRAND IN SPONSORED SEARCH?
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