Sponsored search advertising and its impact on operational policies

Abstract

Over the past two decades, advertising has evolved from traditional offline to more online. The increased ability of users to interact with firms in the online world enabled a shift from “mass” advertising to more “targeted” advertising [1–3]. The ease of accessibility and user-friendly nature of the websites has also resulted in many firms opting to sell their wares online. This has further contributed to firms opting for greater presence on the online advertising platforms. As consumers increasingly use the internet to make purchases, it has become critical for sellers to appear as ‘results’ on the search engines. The topic of interest here is sponsored search. In the United States alone, sponsored search spending reached $49 billion in 2014 compared to $42 billion in 2013 [4]. The largest contributors have been retailers, who account for 22% of total sponsored search spending [4]. The predicted growth rates of sponsored search spending are almost 15% CAGR for the coming years.