1. From generic to Branded: A Model of Spillover in paid search advertising
By Oliver J. Rutz and Randolph E. Bucklin
Presented by Gretchen Ross
April 11, 2017

2. Research Question
To what extent does a spillover effect occur from a generic to branded search? If spillover happens, what are the implications for paid search ad campaigns and consumer search behavior?

3. Search Process
A consumer searches for a hotel, impression made, click, and then reserve
Impression- passive exposure
Click-active option leads to more information
Hotels find generic terms to bid on for sponsored link and are costly
Branded names restricted so lower cost

4. Should Managers use Generic or Branded Keywords?
What about spillover?

5. Spillover Effects
Generic keyword search “spills over” to branded keyword search
Consumers may not be aware that the specific brand is relevant until using a generic keyword
Awareness vs. Awareness of relevance
Consumer may be aware of the brand- awareness
Consumer may not be aware that the brand is relevant to his/her search- awareness of relevance
Using a generic search keyword leads to exposure to branded information thereby increasing awareness of relevance. Awareness of relevance leads to more brand related searches.
Awareness decays over time- assume latent, unmeasured construct for awareness
Authors use Nerlove-Arrow approach because do not have measures for awareness of relevance

6. Model Specification
Multivariate time-series, Dynamic linear model (DLM)
Capture using Nerlove and Arrow (1962) idea of the leaky-bucket model
Used in previous marketing models for goodwill decay
Awareness is a function of generic search activity which enhances/carryover awareness
At the aggregate level, consumers buy or not and want to look at latent construct of awareness as a way to explain behavior
At= awareness at time t, GENt= generic search activity at time t, αA=carryover rate of awareness, and βgen=estimated parameter

7. Model Specification continued
Five outcome variables:
NS- average number of searches per keyword per day
Spillover coefficient ϒ added, I accounts for seasonality. Might increase with increase in awareness
CTR- click-through rate
Spillover nonnegative
CR- conversion rate
POS- average position served
Can only approximate as function of carryover, current CPC, last period’s CTR, and seasonality
CPC- average cost per click
Function of current advertising and past CTR

8. Bayesian DLM
Equations for NS, CTR, CR, POS, CPC, and A are integrated into framework
DLM good for dynamic evolution, underlying mechanics, and latent awareness
Link outcome variables through intervening awareness variable to observed quantities of branded impressions, branded clicks, branded reservations, POS, and total branded cost
Find correlation between lagged generic activity and branded activity and no reverse spillover

9. Other Models- ARDL and VAR
Autoregressive Distributed Lag (ARDL)
No latent construct for awareness
Branded search depends on lagged values, seasonal effects, and lagged generic search activity
Could not separate NS, CTR, and CR
Vector Autoregressive (VAR)
No interaction of different search activity variables
Variables treated as endogenous

10. Empirical Application
Daily information for a major lodging chain on keywords
Includes generic or branded designation, cost information, average position, number of impressions, clicks, and reservations
Data from Google (March 1, 2014-December 20, 2014) and Yahoo (May 6, August 31, 2004)
Estimate DLM, Autoregressive Distributed Lag (ARDL), and Vector Autoregressive (VAR) in Bayesian framework models

11. DLM Model Outperforms Alternatives

13. Summary of Results
Awareness has significantly positive impact on current branded searches
Generic clicks (compared to impressions) have significant positive impact on awareness
Therefore, a user that clicks on ad leads to an increase in branded searches through awareness

14. No Reverse Spillover Found- Generic affects branded

15. No Omitted Variable Bias Found

16. Magnitude of Spillover Effect

17. Conclusions
Demonstrate spillover effect from generic to branded search
Generic clicks have a significant effect on awareness of relevance
Awareness significantly affects the number of branded searches
Strengths:
Previous work does not address spillover
Useful in practice- managers might utilize
Weakness:
No data on organic search- could potentially overestimate their effect