EBay study questions value of Google's main ad service

EBay Inc

EBay Inc, operator of one of the largest online marketplaces, questioned the value of Google Inc's main advertising service in a recent study.

EBay, one of the biggest Internet advertisers, released a study on Friday examining whether the paid search 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 wrote in an email to Reuters on Tuesday.

The study highlights a potential problem for Google, which generated $46 billion in ad revenue last year, up from $38 billion in 2011.

Some leading e-commerce companies, such as eBay and Amazon.com Inc, that have traditionally been big buyers of Google paid search ads may not need the service as much anymore.

"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's Hoff declined to say how much the company spends on Google paid search ads. She also would not say whether eBay has cut spending on these ads, or plans to do so.

An Amazon spokesman did not respond to an email asking the same questions on Tuesday.

EBay Research Labs economists Thomas Blake, Chris Nosko, and Steve Tadelis analyzed eBay sales after halting purchases of some Google search ads. They kept the ads going in some regions so that they could compare results from the two different approaches. The test began in April 2012 and lasted into July 2012.

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