Getting A Slice Of The Pie: Why The Top Ad Position Might Not Be All It’s Cracked Up To Be

SONY DSCIt’s that time of year again! The leaves are changing, the temperature is dropping, and once again we have come face to face with the indomitable force that is the pumpkin. In honor of pumpkin-flavored everything, this week’s research post is going to take a look at the life PPC lessons we can learn from, you guessed it, the pumpkin pie.

Our study this week focuses on ad positioning and how the top position may not be all it’s cracked up to be. Researchers used data from a search engine marketing firm to conduct their analysis and they looked at the effect of position on impressions, clicks, conversions, and revenue for over 2,000 keywords over a 90 day period.

As many paid search advertisers have no doubt experienced, this study found that click-through rate decreased as the ad fell lower on the page. This isn’t a surprise and is probably consistent with what many people see in their accounts.

What is interesting about these findings is that revenue did not follow the same pattern. Instead, revenue initially increased as the ad moved further down the page before finally decreasing again. This is counterintuitive to most people, which is that the higher positions lead to higher click-through rates, which leads to more revenue. However, that may not always be the case.

There’s another, even more important point here. Because it’s a commonly held belief that higher positions produce better performance, competition for those top positions is more intense. This means that, generally, higher position ads cost more. It’s like at Thanksgiving dinner, when everyone is clamoring for a piece of pumpkin pie. (In this instance, consider the pumpkin pie to be the top ad position. It is, after all, the best kind of pie.) Only a few people get the pie (or the top ad positions) but everyone spends a lot of energy trying to get it. In paid search, the problem is that being too gung-ho for the costly top positions without a good strategy to convert those clicks can become dangerously unprofitable.

The good news is, this study hints that there might be an equally delicious pecan pie sitting on the counter behind you that has much less competition. Taking a lower ad position could potentially decrease your costs, while increasing your revenue. While this approach would result in major a traffic drop-off, and we do not recommend this approach, this could be very good news for some retailers who may find themselves too limited on budget to pursue top positions and instead want to focus on being as profitable as possible with the limited budget they have.

One very important caveat is that this relationship was only true when the search terms were longer, rather than shorter. However, the cost of top ad positions for shorter keywords was so high that top positions still remained less profitable compared to less costly lower positions.

The authors speculate that longer keywords might indicate that a user is more focused on making a purchase or searching for something specific. They also note that it’s easier for the search engine to discern a user’s intent from a longer keyword, making it easier to show her ads that are relevant to what she’s really looking for. The discussion of how search term length plays into this relationship ties in nicely with our post from October 1st, which highlighted a study about how search term popularity relates to click-through rate.

Another limitation is that this study was conducted using data only from the clothing retail industry. As they say in the infomercials, “results may vary,” so you never want to go “all in” without significant testing. In the land of paid search, data rules. If you find that increasing your bids to get higher positioning is unprofitable for your business, consider the possibility that the most profitable position for you may not be at the top of the page. But it’s at least worth considering that lowering your position to get the best return can be a useful strategy for advertisers who have smaller budgets and want to make them go farther.