First Cause Automated SEO As Relates To Retail

1 Introduction Search engines are an important way of obtaining information on the internet. According to Alexa Traffic Rank, Google.com is the most popular website in the United States as well as in the world, and in May 2011, it was the first website to achieve one billion monthly unique visitors.1 Many people use search engines as a starting point for navigating the web, making search engines a crucial link in connecting content providers and users. This has spurred a sizable literature on search marketing that studies clicking behavior at search engines. To date, most of this literature has concentrated on the sponsored links that are typically displayed alongside organic links when consumers conduct searches. While most of the economics and marketing literature on search engines has focused on paid clicks, the bulk of the traffic retailers receive through search engines is actually through unpaid clicks on organic links.2 For this reason, more advertisers engage in search engine optimization to improve organic clicks than purchase sponsored links to get paid clicks (Berman and Katona, 2012). To the best of our knowledge, the present paper is the first to provide search marketers with information on drivers of organic clicks to aid in search engine optimization (automated seo). Existing studies of sponsored search are typically based on a modest number of search terms and the corresponding number of paid clicks received by a single retailer. Our research complements these studies by focusing on the organic clicks that 759 retail sites received from more than 12,000 search terms. There is considerable cross-sectional variation in our data: It includes web-only retailers as well as traditional retailers and covers 15 different retail segments including apparel, electronics, and mass merchants. For each of these search terms, we observe which retail sites received organic clicks as well as the number of clicks. We also obtained data from the first five pages of search results on Google and Bing for each search term, and this ultimately permits us to quantify the impact on organic clicks of a site’s rank (position) in the search results. Our data also includes several different measures of the accumulated brand equity of online retailers. These data allow us to determine whether consumers are more likely to click the link of a retailer who is perceived to operate a high-quality site (as a result of the retailer’s current and past investments 1Alexa Traffic Rank is calculated by combining a website’s average number of daily visitors and page views over the past month. 2Our data are consistent with this finding. 2 in advertising, the depth and breath of offerings, secure payments, one-click purchases, returns policies, and so on). Ultimately, this permits us to quantify the benefits of automated seo strategies that attempt to gain traffic by improving a retailer’s rank in organic search results, versus gaining traffic by improving the quality and brand awareness of a site. Not surprisingly, we find that a retailer’s rank on a results page is an important driver of its organic clicks: Exclusion from the first five pages of results for a search leads to a 90 percent reduction in organic clicks. For retailers that are listed on the first five pages of results, a one percent improvement in rank leads to 1.3 percent more organic clicks for that search. Importantly, however, we also find that the brand equity of an online retailer is an important driver of organic clicks and that it is easy for search marketers to overlook the benefits of including investments in the quality and brand awareness of its site as part of an automated seo strategy. The direct benefit of these and other investments in brand equity is an increase in the number of consumers clicking one retailer’s link instead of a competing link on results pages. Moreover, investments in brand equity have an additional indirect effect: Search engines tend to place retailers with stronger brands in better positions, which results in additional increases in organic clicks. Finally, estimated effects of rank on organic clicks are keyword specific, while improvements in the brand equity of an online retailer increases clicks associated with all relevant searches. Taking all of these effects into account, we find that brand equity is as important as rank in determining organic clicks. We also point out that investments that improve site quality and consumer awareness (and more broadly, that enhance an online retailer’s brand equity) are likely to have spillover benefits in other channels that are not accounted for in this or other studies of organic and sponsored search. These benefits include increases in clicks through other online channels (such as price comparison sites), increases in the number of direct visits to a retailer’s website, increases in visits through navigational searches at search engines, and increases in traffic at the retailer’s physical stores. These considerations–coupled with the fact that position is a zero-sum game and thus a retailer is unlikely to obtain a sustainable advantage through direct efforts to improve its ranking–lead us to conclude that brand equity is one of the more important components of retailers’ automated seo strategies. We also find that a retail site’s brand equity is especially important in attracting organic traffic from individuals with higher incomes. Our results indicate that consumers who are older, wealthier, conduct searches from work, use fewer words or include a brand-name product in their search are more likely to click a retailer’s organic link following a product search. The remainder of this section provides an overview of automated seo and the related literature. Section 3 2 discusses our data and describes the econometric methodology underlying our analysis. Section 3 presents our empirical findings, while Section 4 provides robustness checks and some additional results. Finally, we conclude in Section 5 with some additional managerial implications of our findings for automated seo. 1.1 Search Engine Optimization Figure 1 highlights the avenues that retailers have for gaining traffic through search engines. This screenshot shows the search results that appear following a search for “shoes online” using Google Search. In this particular example, three different types of links appear: top ads, side ads, and organic results.3 The top ads (marked by the red box in Figure 1), if any, are the highest listed search results and appear against a yellow background. For this particular search there are three top ads; the maximum number of top ads that may be displayed is four. The organic results (marked by the blue box) are listed below the top ads. Up to ten organic results can appear on a search result page. Finally, the side ads (purple box) appear on the right-hand side of the screen; Google allows for up to eight side ads to be shown on a result page. One way retailers obtain traffic is through the paid links that appear in top or side ads. Unlike organic links, retailers can directly influence the position of ads, which are displayed and ranked according to the results of an auction that is run in real time. Retailers identify keywords they want to bid on and specify how much they are willing to spend. Google determines the ad rank using a site’s maximum bid specified for the keyword and a quality score, which includes factors like click-through rates and relevance. Advertisers only pay when the link is clicked; the cost per click is equal to the minimum amount needed to get a specific position (generalized second-price auction mechanism). There is an extensive literature (discussed below) examining this avenue for obtaining clicks. A second way retailers obtain traffic through the search engine channel is through clicks on organic results, and this is the focus of our analysis.4 A site’s position in Google’s organic search results depends on the site’s relevance to a given search term. The exact algorithm that Google uses to determine a site’s ranking is proprietary; according to Google, it depends on thousands of 3Depending on the search term, up to four bottom ads may appear as well. For the search term “shoes online” no bottom ads were shown. 4Although our main focus is on organic (non-paid) links, we do take the presence of sponsored links (ads) into account, since they may affect organic clicking behavior. 4 factors.5 While the goal of automated seo is to optimize the organic traffic a retailer receives through product searches on search engines, the ultimate goal of retailers is presumably to maximize their profits.