Northern Exposure: A Field Experiment Measuring Externalities between Search Advertisements
"North" ads, or sponsored listings appearing just above the organic search results, generate the majority of clicks and revenues for search engines. In this paper, we ask whether the competing north ads exert externalities on each other: does increasing the number of rival north ads decrease the number of clicks I receive on my own north ad? We conduct a controlled experiment to investigate this question, and find to our surprise that additional rival ads in the north tend to increase rather than decrease the click through rate (CTR) of the top sponsored listing. We propose several possible explanations for this phenomenon, and point out directions for new theoretical models of sponsored search.
First version: September 2009
This version: April 2010