Is Selling Brand Terms on Search Engines a Signaling or a Trial?


Data-driven thinking“is written by members of the media community and contains new ideas about the digital revolution in media.

Today’s column is by Nico Neumann, assistant professor and member of the Center for Business Analytics at Melbourne Business School.

Many governments have started to look at Big Tech and how to tackle practices that can harm a society’s wealth and competitiveness. During the ongoing COVID pandemic, an interesting discussion about the importance of search engine marketing (SEM) has emerged. Even in 2020, when many brands are cutting their advertising budgets, Search advertisements attracted more dollars from advertisers.

What is behind this trend? Is this proof of market domination?

Of course, the good performance of the SEM can be explained in part by natural adjustments in activity. In a world where consumers are increasingly buying online, advertisers will also strengthen their online presence. COVID closures have only accelerated the trend.

However, a key question is still whether search ads have a special role and whether other forces may have contributed to search advertising not being reduced.

Does advertising on the Search Network have a special role?

Traditionally, advertising has been used as a demand generation tool, both in the short and long term history of the medium. Many industry watchers argued that search ads have a different role and should instead be seen as a way to make products available online. Search-targeted ads were compared to signs above or near the store (“signage”), storage spaces in a physical store, or even stores or malls themselves.

While stimulating, these comparisons are misleading. The digital equivalent of a physical store is a brand’s website. The shelf space in the store would also be the product comparison page. If it was the same as a search engine, then there would be no need for Google Shopping.

What about store signs and signs? Would they be the offline equivalent of Search Network ads? To answer this question, we must first understand the two types of search advertising.

Distinguish between brand research and generic research

When talking about SEM, it is essential to distinguish between branded search terms and generic search terms. The first represents searches related to a brand (brand) or a specific product of a brand, such as “Toyota” and “Prius” or “Samsung” and “Galaxy S20”. As the word “generic” implies, this latter type of term represents any broader online search, such as “car” or “tablet”.

We see that these two types of research fulfill different roles. Generic search announcements can indeed be seen as a sign (similar to an entry in the phone book). Ads and listings help consumers find the products or services they are looking for. Search engines act as an agent in this case and connect two parties that otherwise would probably not have found each other. And selling search engine ads is an effective, non-intrusive way to market brands to consumers. That’s why generic search will always be one of the most effective advertising channels. Once customers know where and how to find the product they want (and provided that they are satisfied and are not looking for a new solution), the valuable contribution of the phone book entry or The store sign is coming to an end.

However, in the case of branded searches, consumers clearly know what they are looking for (by definition). If the search engines aren’t acting like a matchmaker here, what value are they bringing?

Well, the two reasons consumers may continue to use a search engine instead of other methods (e.g. direct URL entry) to get to the desired destination are convenience and lack of options for “digital transport”.

The search engine becomes the equivalent of a digital transport network

Today, almost all browsers present search engine results when users type a keyword and not an exact web address into the address bar. This makes browsers an important gateway to search engines, but it also makes the default search engine a powerful digital transport network that consumers use to browse the web. In fact, in Google’s announcement Addressing the Australian News Bargaining Code, Google likened its services to a bus that people take to reach their destination.

The “transport role” of search engines is more critical for the economy than the “matchmaker role”. Both add value, but meet different consumer needs. Transportation has a profound impact on people’s lives, which is why it has been one of the first industries to be regulated.

Take the example of Google’s bus to illustrate the issues of transportation addiction and selling branded search terms.

Is Selling Branded Search Terms a Shakedown?

Imagine you want to take the bus to your favorite Italian restaurant. You don’t really have any choice but to take a bus, but that’s okay because all the buses in your city are free. You can select your preferred bus (most do not differ and an operator has 90% market share).

But here’s where things get weird. Once your chosen bus company notices that you are on board and where you want to go, they contact several other restaurants and offer to divert you to their door in exchange for money. The bus operator will also ask the Italian restaurant you wanted to visit in the first place how much they want to pay to have you brought straight to their entrance (and not be diverted to competitors).

Of course, if some other restaurants are willing to pay more for the diversions, the bus company can’t really force you to get there by leaving you with no other choice. No one would get on such a bus. However, the bus operator will make the initially desired option very inconvenient, to the point that you can simply choose another restaurant. For example, it may indicate that you can go to another Italian restaurant in 5 seconds (the highest bidder), to a steak restaurant in 1 minute (the second highest bidder), or to your originally listed restaurant in 10 minutes (or 20 minutes, depending on the number of other bidders).

No bus company would engage in such practices, but the scenario described is exactly the equivalent of “offline transport” of selling branded terms in the search results rankings for a given search query while hiding the organic link further down the page. Many brands recognize that paying for their own branded search terms provides no incremental value, but feel obligated to pay this unnecessary tax to digital transport providers so as not to lose their [existing] customers:

Advertisers and regulators must take action

First, regulators should review this practice as it can be inconvenient for customers and is also likely to reduce competition. Small, emerging businesses may be able to get customers to visit their websites, but they lack the funds to prevent hijacking and poaching of customers from established brands with deep pockets.

Second, advertisers should avoid branded search auctions whenever possible. This is unethical and the search engines are the only winners in this game. This is a classic case of The prisoner’s dilemma, where every brand (which competes) had better do nothing.

Finally, search engines should reconsider their business models. They deserve to be paid for their services, but should stick to methods that do not hinder the growth of new, innovative businesses or interfere with the intentions of consumers.


Rosemary S. Bishop