Do Sellers Benefit from Sponsored Product Listings? Evidence from an Online Marketplace

Sponsored product listings on online marketplaces are third-party sellers’ ads blended in organic product listings. This paper investigates a seller’s managerial questions: whether a sponsored listing outperforms an organic listing and how the performance varies by positions. Our large-scale field study on a mobile app with experimental and natural variation finds that consumers prefer organic listings in the top-ranked positions to sponsored listings of the same product/position. Consumers become indifferent between sponsored and organic listings in the lower-ranked positions. A mechanism check suggests that top-ranked organic listings are perceived as more credible than seller-subsidized sponsored listings. Despite consumers’ preference for organic listings, a simulation analysis shows that an advertising seller may benefit financially if a lower-ranked organic listing can be replaced with a top-ranked sponsored listing.

History: Olivier Toubia served as the senior editor.

Funding: J. Shi acknowledges financial support from INFORMS Society for Marketing Science Doctoral Dissertation Early Stage Research Grants.

Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mksc.2021.0293.