Search advertising has become an increasingly prevalent approach for online retailers to promote their products. However, the actual performance of search advertisement largely depends on their advertising strategies. This research aims to investigate the effect of bidding price on product click-through rate and product sales, with a focus on the moderating role of product competitiveness. We collected data consisted of 4,283 search advertising records of 421 advertised stock keeping units (SKUs) and 116 keywords from a retailer operating on a leading e-commerce platform. This dataset was matched with observations on rival products on this platform. Our analysis revealed an inverted U-shaped impact of bidding price on advertising performance. In addition, product competitiveness weakens the relationship between bidding price and click-through rate. This research enriches the literature on search advertising by untangling the impact of bidding price and highlighting the necessity of considering product competitiveness when making bidding strategies.
Qiu, Ping; Cai, Zhao; Chan, Hing Kai; Kong, Xiangtianrui; and Shi, Ye, "Disentangling the Impact of Bidding Price on Click-through Rate and Product Sales in E-commerce Search Advertising" (2023). PACIS 2023 Proceedings. 125.
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