Today’s buySAFE Blog is contributed by Michael Beveridge, VP of Business Intelligence and Optimization. Michael has turned his formidable quantitative powers to a question that any on-line consumer – and merchant – should ask: Are the results in paid search any safer than those you see in natural search results?
The Question
buySAFE recently conducted an in-depth study to understand whether online stores who use paid search are more or less safe shopping alternatives than those stores that a shopper would find using only natural search.
What is Paid Search?
Paid search simply allows a merchant to pay the search engine to elevate that merchant in the display of any search results. It is like any advertising: paying for the placement of the merchant’s name in a certain context. Paid search provides an incremental revenue stream for search engine providers — a revenue stream they optimize by allowing advertisers to bid for preferential placement. Advertisers are advantaged as they can precisely promote their products in search results to those shoppers who are looking to buy such products. For consumers, there is expansion of product choice as paid search opens up a full second stream of responses above and beyond the "natural results" otherwise provided by the search engine. Given the search engine's ability to micro-segment and to provide real time market-clearing pricing, paid search is an efficient mechanism to provide relevant AND economically efficient choice to consumers.
But how does merchant safety compare in natural vs. paid search? When searching for a product, and faced with the option of engaging with a merchant encountered through organic search, vs. paid search, where can a buyer feel more confident that they will be dealing with the most reputable on-line seller, who is following best practices, and is most likely to follow through on their sales terms and conditions?
Forces that May Make Paid Search More or Less Safe than Organic Search
Moral Hazard — or advertising incents bad guys to disguise themselves as good guys.
The web provides ample opportunity for less reputable sellers to use the anonymity of the web to disguise themselves as market leaders. There is ample evidence and examples of market actors attempting to manipulate their feedback rating, scores, customer feedback, etc. in order to provide buyers a sense of comfort dis-proportionate to the seller’s true track record and commitment to fulfillment. Paid search provides broad reach to a small, un-established seller, who would not typically show up prevalently in natural search. As it is very difficult, a priori, to distinguish the highly reputable small sellers from his disreputable look-alike, there is strong incentive for marginal players to leverage paid search.
Marginal Economics — or it’s cheaper to sell when you don’t honor a guarantee. Reputation and the financial and operating investments required to run a reputable franchise are expensive. Building the security, compliance, privacy policy, product guarantee, customer services and dispute resolution process one would expect from a reputable seller are significant elements of the seller’s cost structure. Bad actors, by comparison, gain a significant cost advantage by ignoring such expected best practices. By extension, the ROI decision for a bad actor is advantaged relative to a reputable seller, as both face market driven CPC or CPA rates for customer (click) acquisition.
The Economics of Advertising —or advertising signals institutional permanence.
Conversely, there is a well-established literature in economics that market leaders advertise as a way to signal financial stability and institutional longevity. A well- established player, while interested in advertising spends that are NPV positive, may also recognize that an advertising campaign will continuously establish them as market leaders. A reputable market leader may also have the incentive to establish a search advertising strategy that prevents competitors and/or less reputable predators from gaining a foothold on its natural sales arena.
buySAFE’s Findings on the Trustworthiness of Paid Search
Over the last several months, buySAFE has conducted an analysis to assess the relative ‘trustworthiness’ of merchants who show up in natural vs. paid search. By trustworthy, we applied a fully objective standard, the buySAFE Shopping Advisor. The buySAFE Shopping Advisor systematically examines online sellers and assesses them against a four point objective framework – Simply put, is the merchant following best practices for online sellers:
- SSL Encryption: Is a valid SSL in use to ensure secure data transmission?
- Website Security: Is the merchant's website regularly inspected for security vulnerabilities?
- Privacy: Is there a published privacy policy describing how the merchant will protect personal information?
- Bonded Shopping: Is the merchant bonded so the shopper can trust the merchant will perform as promised and that the purchase will be fully guaranteed?
buySAFE performed online searches for the 290 most popular consumer products, as measured and published by ebay pulse (http://pulse.ebay.com). We then compared the average buySAFE Safe Shopping Rating for search results for these common products provided by Google, MSN and Yahoo and compared the average results for natural and paid search.
In short, across the three major search engines – Google, Yahoo and MSN, the average Safe Shopping Rating for paid search was consistently higher than natural search.
So What Does this Mean?
At a macro level, this demonstrates that merchants using paid search results tend to be marginally safer, and adopt at higher rates the best practices of on-line selling. On the surface, this would suggest that the incentive for less reputable players to steal share is trumped by incumbents’ ability to finance ad campaigns and defend their natural turf.
However, the impact is only marginal. If a buyer were looking for a sure-fire way to find fully reputable merchants, paid search is not the entire answer. Put another way, paid search gives the consumer higher odds of finding reputable merchants, but she is still not 100% guaranteed to find one.
And that’s part of the problem for the online shopper – you are either safe, or you are not safe – and, as with bungee jumping, you don’t find out until it’s too late to cancel. And if you are marginally more safe with paid search – you are still not 100% safe.
And that is where the buySAFE Shopping Advisor as a consumer tool comes in. By installing the buySAFE shopping Advisor, the consumer will know, real time, and at the point of sale, which seller (via natural OR paid search) is following which best practices, and can make an informed purchase decision EVEN BEFORE GOING TO THE MERCHANT’S SITE. No more guesswork, no more playing the odds.
But How Do I – the Individual Consumer - Benefit from the buySAFE Shopping Advisor?
Thanks for asking! It’s incredibly easy, quick and free (both to download and to use). Just click here to try Shopping Advisor.
— Michael Beveridge, buySAFE, Inc., VP of Business Intelligence and Optimization
