eBay have long been one of the top spenders on Google ads but that may all be about to change. Last Friday a study was released that revealed the return on investment for paid search was surprisingly weak for the auction website.
It’s an extensive report that you can read in full here, but the key conclusions are:
- Brand keywords provide almost no return – not only will the brand always appear top of the natural listings making the ad less important, but people are ONLY interested in the brand so will not be distracted by ads from competing companies.
- Returns on generic keywords, while positive, are much smaller than commonly assumed – everyone knows eBay and if they want eBay they’ll go straight to it. Those that just stumble across it are far less likely to convert.
- New and infrequent users are positively influenced by ads, but frequently/loyal users are not. It is the latter that account for the majority of the ad spend and therefore the net return is negative.
I must say that logically it makes complete sense; large brands will attract their core, loyal and profitable audience regardless of Google ad spend. But there are a couple of points worth raising:
- This applies to big brands and big brands only. Small or new brands cannot depend on huge revenue from a core, loyal following. They need the broader market and that requires some form of marketing, whether paid or otherwise.
- The study is primarily concerned with the short to medium term impact of ads. The implications of gradual loss of brand awareness are far less clear and it may be that in the long term the ongoing investment in ads would be significant.
Regardless of whether or not Ebay should continue to invest in ads, their position – where the brand is so strong that the profitability of further paid promotion becomes fuzzy – is a goal for which every big brand should aspire to. It’s a hell of a problem to have.
Dan
