Are Search Ads a Waste of Money?
NEW YORK New research by Microsoft suggests a big chunk of search ad spending is wasted because advertisers pay top dollar for high ad placements clicked by consumers who are en route to their sites anyway. Listings tied to such "branded" keywords …
Context & Ripple Effects
Microsoft's research lands on a paid-search market already uneasy about what its clicks are worth. A year earlier, advertisers were flagging click fraud as a huge problem, and a MediaPost survey found buyers rating Google's ads above Yahoo's and MSN's — a hierarchy that priced branded keywords at a premium on the leaders' auctions.
That positioning matters here: as the third-ranked search seller, Microsoft has an obvious incentive to argue that top ad slots capture demand that was already converting — if branded-keyword clicks are largely navigational, the highest-priced inventory in search is partly redundant with organic results, and the auction premiums deflate.
First-order effects
- Brand advertisers bidding on their own trademarks now face a direct budgeting question: whether to cut or drop bids on keywords where Microsoft's data says the customer was arriving anyway.
- Google and Yahoo, whose auctions set the premium prices for branded terms, must defend the incrementality of that inventory against research published by a rival seller.
Second-order effects
- If advertisers act on the finding, search engines lose some of their highest-margin query volume, pressuring the platforms to prove value through better conversion tracking rather than placement.
- Measurement vendors and agencies gain leverage: 'would this click have happened organically?' becomes the pitch for attribution tooling sold into brand budgets.
Third-order effects
- The industry drifts from paying for position toward demanding proof of incremental lift — an accountability standard that reshapes how all paid-search inventory is priced and audited.
- Navigational-query monetization becomes contested ground between brands and the engines holding their trademarks, pushing toward policy and contractual fights over who owns brand-term traffic.
The trend: Paid search is moving from a placement-priced market toward one where sellers must demonstrate each click's incremental value, with branded keywords as the flashpoint.