How Does the Use of Trademarks by Third-Party Sellers Affect Online Search?

Abstract

Firms that sell via a direct channel and via indirect channels have to decide whether to allow third-party sellers to use the trademarked brand name of the product in their advertising. This question has been particularly controversial for advertising on search engines. In June 2009, Google started allowing any third-party reseller for a product to use a trademark, such as 'Doubletree,' in the text of its ad, even if the reseller did not have the trademark holder's permission. We study the effects of this change empirically within the hotel industry. We find some evidence that allowing third-party sellers to use a trademark in their online search advertising weakly reduced the likelihood of a consumer clicking on a trademark holder's paid search ads. However, the decrease in paid clicks was outweighed by a large increase in consumers clicking on the unpaid links to the hotelier's website within the main search results. Our evidence shows that when third-party sellers focus on the trademarked brand in their ads, their ads become less distinct, and customers are more likely to ignore the advertised offers and buy from the direct channel.

Copyright, Digitization, and Aggregation

“…Thus far, most of the literature has centered on digitization and piracy within the music industry (Rob and Waldfogel, 2006;Oberholzer-Gee and Strumpf, 2007;Danaher et al, 2010) or on the use of trademarks (Bechtold, 2011;Chiou and Tucker, 2011). We focus on digitization and the reproduction of content for information more generally.…”

Price Information Patterns in Web Search Advertising: An Empirical Case Study on Accommodation Industry

“…Recently, some researchers, such as Chiou and Tucker [9] and Rutz and Trusov [31], studied the impacts of textual content (e.g., use of queries or trademarks) of search advertising on consumer behaviors (e.g., click-through). In one of its tips for creating successful ads, Google suggests including prices, promotions, and exclusives in the text, so that consumers can use this information to make decisions.…”

“…Most of the research focused on auction mechanism design used in search advertising [3], [13] and effectiveness of position and query characteristics on click-through rates or conversion rates [15], [38]. Surprisingly, although Ad content is an important component of search advertising, it has been almost neglected in search advertising research, with the only exception of two recent studies on how queries [32] and trademarks [9] in ad content affect consumers' actions. Different from traditional advertising media, search…”

Online Advertising

“…Chiou and Tucker (2010b) have analyzed how regulation about use of trade-marks has affected online advertising. Generally upstream firms have resisted the use of the trade-marks and slogans by downstream resellers of their products.…”