Why sponsored online listings may be detrimental to your brand

By our News Team | 2023

It doesn’t always pay to advertise online. Consumers tend to view sponsored listings with suspicion and prefer to click on organic listings.

Sometimes it doesn’t pay to advertise. These are the findings of a study led by the University of California, Riverside, which examined the value of participating in the ‘sponsored’ product advertising spaces offered by major online shopping platforms such as Amazon.com and eBay.


Sellers pay platforms advertising fees per click for such spots, which label the products as ‘sponsored’ or, on some platforms, as ‘ad’, and place them in designated ad slots blended into search query results.

Search Engine Listings

Photo by Lisa Fotios from Pexels

Platforms and sellers expect the ‘sponsored’ and ‘ad’ signs to be more visually prominent and, therefore, more enticing to online consumers.


Consumers, however, tend to view sponsored listings with suspicion and often prefer to click on organic listings that appear high in their product search results but are not sponsored, said Max Joo, an Assistant Professor of Marketing at the university, and lead author of the study.


In fact, a sponsored listing can be detrimental when it replaces a seller’s organic listing that would have appeared in the top few positions in the search results. In these situations, consumers are more likely to click and purchase the same product when it appears as an organic listing.


The study was based on the analysis of 448,417 sponsored and organic listings for 8,720 unique products from a leading e-commerce platform.


According to Joo, it’s a matter of trust. “Customers don’t trust a seller’s self-promotion they perceive in sponsored listings,” explains Joo. “If there is something in the second position that is subsidised by the seller, the subsidised product is not perceived as the actual number two.”


Third-party stamp of approval


On the contrary, high-ranking organic listings come with the sense of a third-party stamp of approval. Consumers view the platform’s algorithms that rank seller listings as a credible evaluator, Joo says.


Sponsored listings, however, are still good investments in certain situations. Sponsorships can pay off when sellers’ listings organically appear far down in the consumer’s product query results and, consequently, may not be frequently exposed to consumers. 


This is because the sponsored listing may increase the seller’s exposure, and the benefits from the incremental exposure may offset the losses from the ad avoidance and per-click ad cost.


Additionally, the type of product matters. When consumers seek clothing or fashion items, they do not avoid sponsored listings because they make choices based on how the products look and worry less about the perceived trustworthiness of a seller that carries the products. 


But for products that result in future user experiences, such as consumer electronics, shoppers prefer to purchase from a trusted source. In other words, they buy from the highly ranked organic listing, the study found.


The study’s finding presents a conundrum for sellers. They do best when their organic listings appear high in the results of consumer product searches. Yet, what data is used and prioritised by the platform algorithms to produce product search results are closely regarded secrets, Joo states.


Titled ‘Do Sellers Benefit from Sponsored Product Listings? Evidence from an Online Marketplace’, the study is currently available as a working paper on the SSRN Electronic Journal. You can read more about the research here.

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    Dr Kin Kariisa

    Group CEO - Next Media

    Dr. Kin Kariisa is an extraordinary force at the helm of Next Media Services, a conglomerate encompassing NBS TV, Nile Post, Sanyuka TV, Next Radio, Salam TV, Next Communication, Next Productions, and an array of other influential enterprises. His dynamic role as Chief Executive Officer exemplifies his unwavering commitment to shaping media, business, and community landscapes.
    With an esteemed academic journey, Dr. Kariisa’s accolades include an Honorary PhD in exemplary community service from the United Graduate College inTexas, an MBA from United States International University in Nairobi, Kenya, a Master’s degree in Computer Engineering from Huazong University in China, and a Bachelor’s degree in Statistics from Makerere University.
    Dr. Kariisa pursued PhD research in Computer Security and Identity Management at Security of Systems Group, Radboud University in Nijmegen, Netherlands. As a dynamic educator, he has shared his expertise as a lecturer of e-Government and Information Security at both Makerere University and Radboud University.

    Dr Kin did his PhD research in Computer Security and Identity Management at Security of Systems Group, Radbond University in Nigmegen, Netherlands. He previously served as a lecturer of e-Government and Information Security at Makerere University in Kampala, Uganda and Radbond University in Netherlands.

    Dr Kin did his postgraduate courses in Strategic Business Management, Strategic Leadership Communication and Strategies for Leading Successful Change Initiatives at Harvard University, Boston USA.

    • Other current and previous roles played by Dr Kin Kariisa:
    • Lecturer of e-Government and Information Security to graduate students at Makerere University, Kampala and Radbond University in the Netherlands
    • Director of Eco Bank Uganda Limited, one of the largest banks in Africa
    • Chairman of the National Association of Broadcasters, an umbrella industry association for all Television, Radio and online broadcasters in Uganda.
    • Chairman of Board of Directors of Nile Hotel International, that owns the leading hotel in Uganda, Kampala Serena Hotel.
    • Chairman of Board of Directors of Soliton Telmec Uganda, the leading telecom company in Optic fibre business managing over 80% of optic fibre in Uganda.