eBay is publicly questioning the value of Google ads. Specifically, they released a study examining whether the ads it bought on Google and that show up to the right of search results were worth the investment.

“The conclusion: Incremental revenue from paid search was far smaller than expected because existing customers would have come to eBay regardless, whether directly or through other marketing channels,” eBay spokeswoman Johnna Hoff.

This might be worrisome for Google, because eBay and Amazon.com have traditionally been some of the biggest buyers into Google searches, resulting in $46 billion in ad revenue last year. “This has to be a major concern for Google,” said Oren Etzioni, an online search expert at the University of Washington and co-founder of shopping search service Decide.com.

“Strong brands like eBay, Amazon, and others need Google less and less as they have established a loyal online following,” he added. “The eBay study validates this common-sense conclusion. Even at the far smaller Decide.com, we’ve found that buying ads on Google was not cost effective.”

eBay Research Labs economists Thomas Blake, Chris Nosko, and Steve Tadelis looked at eBay sales after halting purchases of some Google search ads, then kept the ads going in some regions for a test group. There was no drop off for the eBay listings where the Google ad purchases were switched off, though it was more likely to bring in users that use eBay less than three times in the last year.

The authors believe that paid search ads generate about 25 cents in extra revenue for each $1 spent. “eBay’s experiences suggest that all companies should look carefully at how much bang they’re getting for their search marketing dollars,” Columbia Business School professor Ray Fishman wrote in a Harvard Business Review blog.

Google’s own studies said that 89 percent of search ad clicks were “incremental” meaning that the ads generated more visits to the advertisers’ websites. “Since outcomes differ so much among advertisers and are influenced by many different factors, we encourage advertisers to experiment with their own campaigns,” the Google spokesman added.

In this the eBay study agreed, saying that paid search ads may work better for other companies. Smaller businesses that lack the name recognition of eBay and Amazon may get more out of Google search ads.

Source: HuffingtonPost.com