Featured Article:

Michael R. Baye, Babur De los Santos, and Matthijs R. Wildenbeest

While previous literature has focused on the role of sponsored links in consumer searches, Michael R. Baye, Babur De los Santos, and Matthijs R. Wildenbeest are the first to explain the drivers of organic (natural) clicks to improve search engine optimization (SEO). In this interview, the authors discuss why investing heavily in brand equity, instead of exclusively on search rankings, is crucial for a retailer’s SEO strategy.

The following section is a Q&A with Michael Baye, Babur De los Santos, and Matthijs R. Wildenbeest

1. How does your research depart from previous studies on search engines and clicking behavior?

We focus on drivers of organic (natural) clicking behavior on two major search engines—Google and Bing. In contrast, the related economics and marketing research primarily focuses on drivers of “paid clicks” on the sponsored ads displayed on the results pages of search engines. Since the lion’s share of searchers click on organic rather than sponsored links, quantifying the drivers of organic search is important for retailers hoping to increase traffic through search engine optimization (SEO). Our empirical results, which quantify these drivers, are based on the organic clicks that more than 750 retail sites received from over 12,000 search terms/phrases. In contrast, the related literature on sponsored clicks typically relies on data from a modest number of retailers and search terms

2. What does your research tell us about the different effects of organic and sponsored content on clicking behavior?

Most of the clicks stemming from searches at Google or Bing are on organic rather than sponsored links. The prominence or accumulated brand equity of a retailer is an important driver of organic clicks, and in some instances is a more important overall driver of clicks than where a retailer’s link appears following a specific search. Retailers with a sponsored link on the first page of organic results receive 37% more organic clicks after controlling for rank, brand equity, and other drivers of clicks. This positive relationship suggests that sponsored links may provide complementary information about a retailer that increases a searcher’s perceived value of clicking its organic link. For instance, it might lead a searcher to conclude that the corresponding organic listing is relevant; alternatively, the sponsored link might have value as an advertisement that increases the brand equity of the retailer, making consumers more likely to click on organic as well as sponsored links.

3. According to your research, what is the most important component of a retailer’s Search Engine Optimization (SEO) strategy and why?

The accumulated brand equity of an online retailer is an important driver of organic clicks, and is therefore an important component of a retailer’s SEO strategy. The direct benefit of investments in site quality (or more broadly, brand equity) is an increase in the number of consumers clicking one retailer’s link instead of a competing link on results pages. Investments in brand equity also have an additional indirect effect: Search engines tend to place retailers with more brand equity (e.g., more prominent names) in better positions, which results in additional increases in organic clicks. Investments in brand equity also have important spillover effects, including additional clicks through other online channels (such as price comparison sites), increases in the number of direct visits to a retailer’s web site, increases in visits through navigational searches at search engines, and increases in traffic at the retailer’s physical stores.

4. What is the relationship between brand equity and consumer income?

Brand equity has differential effects across individuals in different income classes. For households with incomes that are less $75,000 the elasticity of organic clicks with respect to brand equity is smaller than for those with a household income that exceeds $75,000. This suggests that brand equity is a more important driver of organic clicks for richer than poorer searchers.

5. What does your research indicate about the importance of rankings?

Rank (screen position) is a very important driver of organic clicks; it is hard for a retailer to get organic clicks from a specific product search if its link is not observed on the first couple of pages of results for that search. Nevertheless, our analysis suggests that it would be a mistake to make rankings the exclusive focus of SEO. Rankings are a zero-sum game, and other retailers also have strong incentives to ensure that their sites contain the information needed to be properly indexed by search engines. Additionally, strategies designed to improve rank need not result in a long-run increase in organic clicks. This is especially true of efforts to “trick” search engines into viewing a site to be relevant when it is not. It is also important for managers to recognize that estimates of the impact of rank on organic clicks are keyword specific, and that apples-to-apples comparisons of the benefits of rank versus other drivers of clicks require an adjustment for the importance of that search in generating organic clicks relative to all relevant searches.

6. What are the managerial implications of your research?

Even though the rank or position of an organic link in search results is important for generating traffic from search engines to a retailer, it would be a mistake to exclusively focus on rankings when designing a SEO strategy. In fact, our research shows that the benefits of including brand equity as part of an SEO strategy are high. Investments in branding have both direct and indirect effects on organic clicks. The direct effect stems from our finding that consumers are more likely to click on links they know and trust—a finding that is consistent with evidence from other channels, including price comparison and auction sites. But brand equity has an equally sizable indirect effect: Search engines want to provide users with relevant links, and the brand equity of a site is correlated with the relevance of links, which leads to better ranks and positions. Importantly, the brand equity of a site impacts organic clicks for all relevant keywords, not just those related to a particular search, so there is an amplification effect of SEO strategies targeted to improve the branding of a site.

Michael R. Baye

Babur De los Santos

Matthijs R. Wildenbeest