Does Sponsored Search Advertising Augment Organic Search? Evidence from an E-Commerce Platform

This paper provides empirical evidence on the performance of sponsored search advertising in a case study of an unnamed e-commerce platform. I leverage a field experiment that blocks all sponsored search advertising for 3% of site visitors. The experiment shows that sponsored search advertising both steals business from organic listings and also reduces the total volume of transactions intermediated by the platform. However, in this case study, I find that sponsored search is nonetheless profitable for the platform because ad revenue more than compensates for the reduction in commissions that the platform earns on transactions.

This paper was accepted by Raphael Thomadsen, marketing.

Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.04792.