Are big brands wasting money on SEM?

If you have ever Googled Ford, Amazon, or Rogers (try it) you'll see two listings at the top of the page—the top one is a paid ad the other is organic (free).  Now, try it with eBay. Spot the difference? There is just one listing at the top, the organic one.

Why the difference and what does EBay know that other big brands don't? 

In 2012, eBay wanted to know if there was any benefit to paid search ads that contain the word "eBay," i.e. branded keyword ads.  So, it stopped buying these ads on Bing and Yahoo, while keeping them on Google.  The result?  No difference in sales from Bing and Yahoo compared to Google.  Customers simply clicked on the organic link in the absence of the ad.

The company then wanted to see how effective non-branded keyword search ads would be.  In this case, it chose "used les paul guitar."  Conventional wisdom told it that without a targeted ad a guitar reseller, like Chuck's Used Guitar Barn, would appear ahead of eBay.  So, it shut off all Google search ads in one-third of the US while keeping them in the remainder to see what would happen.  The result?  In the cut off region, people who had used eBay before and were looking for a used guitar found their way there either through the free listing or eBay's site.  And, in places where the paid ads were still in running, this same category of customers clicked on the paid ad—eBay had to pay Google for existing customers who were already on their way to eBay to buy a used guitar.  The only bump it got was a slight increase in users with little or no history with eBay; they were potential customers looking for information. 

This is not to say all paid search ads are worthless.  They have a practical use for smaller companies with no brand recognition or without a high Google page ranking.  They are a way to inform new customers about their services.  They may also be more profitable for smaller companies breaking into a new, local market.  The challenge for the big brands is the need to determine, despite what the experts say, what, if any, benefit do paid search ads (branded and non-branded) provide?  Are they worth the expense? It was clear to eBay that people found their way to its site either way without a drop in sales and that its was wasting money attracting existing, converted, customers with its ads.  So it stopped buying and saved millions.

You can read about it here.