Why Your Competitor’s High Google Ranking May be a Good Thing

by Eloqua on April 3, 2012 in Digital Marketing

It’s a simple equation. Your competitor rises in Google’s search results, you take the hit.

Easy math.

But a recent study on sponsored search suggests the opposite might be true; that competing high-ranking organic search results may actually boost the performance of your paid search ads.

The results are found in the paper “Sponsored Search: How Organic Results Impact Sponsored Search Advertising Performance,” written by business professors at the University of Texas, the University of Pennsylvania and Carnegie Mellon University.

Over 45 days, the authors teamed up with a pet product company running a sponsored search campaign on Google, capturing daily data on clicks, orders and costs for the keywords used. They systematically varied the ad’s position and used a web crawler to record organic and sponsored search results that appeared alongside in an effort to replicate the common consumer experience.

What they found was surprising. “While competition always hurts click-through rates, it can help increase conversion rates,” the report states. And for less specific keywords this was especially true.

“If you go back to how people make buying decisions, they form something called the concentration set,” said Ashish Agarwal, a professor at the McCombs School of Business at the University of Texas at Austin and co-author of the study. In other words, the data suggests that as customers research products, they narrow in on a smaller group of search results as they get closer to making a purchase.

In the cases of generic keywords, Agarwal told me, paid-for search results that appear near competing, highly trafficked organic results often see an increase in conversions. (The same can’t be said for more specific keywords.)

Those paid search results may not get as many clicks, but their position provides them with a higher number of conversions.

These findings have important implications, Agarwal said. First, it gives brands who are struggling to rank for generic keywords a fighting chance. “Nissan or Honda may not show up for certain keywords,” he said. “It’s a challenge even for big players.”

Secondly, it should change the way marketers approach sponsored search campaigns. Many might have assumed that it’s pointless to buy ads against keywords where the competition takes top ranking. But this could actually be a winning strategy. If Niassan or Honda is getting beat for “new truck” by Toyota, they might want to run a sponsored search campaign for that term.

The bottom line, according Agarwal, is that marketers need to evaluate sponsored search campaigns in the context of where they appear with organic search results, not as a strictly separate entity.

So if you can’t beat the competition, maybe it’s time to join them.

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