Elsevier

Decision Support Systems

Volume 119, April 2019, Pages 96-106
Decision Support Systems

AKEGIS: automatic keyword generation for sponsored search advertising in online retailing

https://doi.org/10.1016/j.dss.2019.02.001Get rights and content

Highlights

  • This paper presents an automated approach (AKEGIS) for generating valuable keywords for Sponsored Search Advertising (SSA).

  • Empirical analyses revealed that keywords used in internal searches in online stores constitute promising candidates for SSA.

  • It increased the number of keywords, improved the conversion rate by 41% and decreased the average cost per click by 70%.

Abstract

Sponsored search advertisers face several complex decisions when planning and implementing a new sponsored search advertising campaign. These decisions include the selection of keywords, the definition of landing pages, and the formulation of bidding strategies. Relatively low attention has been paid on supporting the selection of keywords in recent research and most studies on sponsored search advertising focus on the formulation of bidding strategies and strategies for budget planning. We present a novel approach for automatically generating sponsored search keywords that relies on the theory of consumer search behavior. Our approach uses an online store's internal search log to extract keywords used by consumers within their search process, because recent research has shown that especially consumers with a high conversion probability that exhibit goal-directed instead of exploratory search patterns use an online store's internal search engine. We empirically test our approach based on a store's internal search engine and identify the effects of this approach by comparing it to a state-of-the-art approach. Our analysis reveals that our approach substantially increased the number of profitable keywords, improved the store's conversion rate by approximately 41%, and decreased the average cost per click by more than 70%.

Introduction

Sponsored search advertising (SSA) has emerged as a new form of Internet advertising in the last decade and is the prevailing business model for generic search engines like Google or Bing. In 2017 search revenues totaled $40.6 billion in the United States alone which represents 46% of total internet advertising revenue [26]. Consumers typically accept this kind of advertising and prefer it over other forms, such as banners, because providers deliver only ads that match the consumer's search requests. Advertisers thus spend a larger share of their advertising budgets on SSA. Advertisers usually bid at auctions for specific keywords and face in this process some complex decisions that largely affect the profitability of SSA campaigns [15]. First, advertisers need to determine the relevant keywords for which they want to place bids. Second, advertisers need to define for each keyword the page (i.e., landing page) to which search engine users will be directed when clicking on the advertiser's ad. Third, they need to set a budget for their SSA campaign. And fourth, they need to determine bids that will result in a high conversion rate and ultimately high profits or customer lifetime values.

Recent research has mainly focused on determining optimal bids [4], [36], [53], [64], budget optimization [20], [33], [42], [63], and the effects of different types of keywords on an advertiser's sponsored search performance [17], [27], [29], [38], [46]. Although researchers and practitioners provide evidence which types of keywords are rather profitable, the generation of concrete keywords is still one of the major challenges advertisers face [54]. The keywords should somehow relate to the advertised goods and they should be used in queries by consumers who are likely to click on a sponsored link and ultimately make a purchase. In recent years, a limited number of studies, e.g., [31], [55], proposed methods to automatically or semi-automatically expand an existing keyword set. All these methods need an initial keyword set and thus are not suitable to completely automatically generate sponsored search keywords. However, the automatic generation of keywords constitutes one of the most promising areas of SSA because nowadays the manual generation of typical campaigns with more than 10,000 keywords is time-consuming while the limitation to a few thousand keywords is certainly not optimal in terms of profits.

This manuscript aims to close this gap with an approach for automatic keyword generation. To come up with a theory-driven design, we review studies on consumer search and decision behavior and provide in initial empirical studies strong evidences that keywords used in on-the-store searches seem to be promising candidates for sponsored search advertising. Our approach for automatic keyword generation (AKEGIS) relies on these findings and automatically i) generates sponsored search keywords, ii) identifies landing pages, and iii) suggests keywords that should be paused for SSA. In an empirical investigation of two large-scaled online stores, we show that AKEGIS clearly outperforms manual experts (state-of-the-art approach) in generating keywords. It generates three times more profitable keywords, reduces the average cost per click and increases the online store's conversion rate.

Section snippets

Keyword generation

We briefly describe the process of sponsored search advertising from the perspective of an advertiser in this section and then review literature on generating keywords for sponsored search advertising.

AKEGIS – an automatic keyword generation approach

We propose our approach AKEGIS for automatic generation of sponsored search keywords in this section. We first review research on consumer search behavior and then provide empirical evidences that an online store's search engine log may provide a list of promising keyword candidates for SSA. In such logs the search behavior and the usage of keywords during the customer journey is stored for further analysis and optimization processes regarding the internal search quality. Usually most of the

Empirical evaluation

We implemented the idea of automatically generating sponsored search keywords based on the search log of a store's internal search in cooperation with a large-scale online store and measured several SSA performance indicators before and after the implementation. We compare these performance indicators to those of a second and similar online store from the same company to capture any effects over time (like seasonality or trends). In the following, we describe the empirical setting, explain the

Robustness checks

Difference-in-difference estimations compare two regions or periods of one group that are separated by a treatment intervention. A control group is contrasted with the treatment group to estimate the trend in the treatment group for the case in which the treatment has not been set. Differences between the two regions or periods of the treatment group might also be the result of some pre-treatment trends. We conduct robustness checks to test for possible pre-treatment trends by estimating

Discussion

In this section, we discuss the implications of our study for researchers and online store managers. Furthermore, we discuss limitations of our study and provide avenues for further research.

Conclusion

Existing research has characterized consumers who use an online store's internal search as rather goal-directed [40]. Goal-directed consumers show a higher conversion probability than exploratory consumers. Keywords entered in an online store's internal search hence mainly are from consumers with a rather high conversion probability. This manuscript introduced a novel approach (AKEGIS) that allows for automatically generating keywords for sponsored search advertising based on the keywords of an

Michael Scholz (1981) studied information systems at the Martin-Luther-University Halle/Wittenberg and received his Ph.D. in December 2009 from the University of Passau. He is now an assistant professor for information systems at the University of Passau. His research has been published in journals, such as European Journal of Operational Research (EJOR), Decision Support Systems (DSS), Journal of Statistical Software (JSS), Business & Information Systems Engineering (BISE) and in a number of

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  • Cited by (0)

    Michael Scholz (1981) studied information systems at the Martin-Luther-University Halle/Wittenberg and received his Ph.D. in December 2009 from the University of Passau. He is now an assistant professor for information systems at the University of Passau. His research has been published in journals, such as European Journal of Operational Research (EJOR), Decision Support Systems (DSS), Journal of Statistical Software (JSS), Business & Information Systems Engineering (BISE) and in a number of proceedings (e.g., ICIS, ECIS).

    Christoph Brenner (1981) studied business informatics at the University of Hamburg. After graduating, he worked for a start-up company and shortly afterwards founded an online marketing company. Christoph is a doctoral student at the Goethe University in Frankfurt.

    Oliver Hinz (1974) studied at the TU Darmstadt Business Administration and Information Systems with main focus on Marketing, Software Engineering and Computer Graphics. After receiving his diploma (equiv. master degree) he worked several years for the Dresdner Bank as a consultant for business logic. Oliver worked as a Research Assistant at the Chair of Electronic Commerce (2004–2007) and received his Ph.D. in October 2007 from Goethe University Frankfurt. He supported the E-Finance Lab as Assistant Professor for E-Finance & Electronic Markets from 2008 to 2011 and then joined the TU Darmstadt and headed the Chair of Information Systems | Electronic Markets until September 2017. Oliver is now Full Professor of Information Systems and Information Management at Goethe University Frankfurt. His research has been published in journals like Information Systems Research (ISR), Management Information Systems Quarterly (MISQ), Journal of Marketing (JM), Journal of Management Information Systems (JMIS), Decision Support Systems (DSS), Business & Information Systems Engineering (BISE) and in a number of proceedings (e.g. ICIS, ECIS, PACIS). According to the German business journal “Handelsblatt” he belongs currently to the top researchers in the management disciplines in Germany.

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