An eBay research study Consumer Heterogenity and Paid Search Effectiveness, by Thomas Blake, Chris Nosko, and Steven Tadelis (2013, bit.ly/10E5mDU) looks at the effect of PPC.

My summary of the research:

  • PPC does not increase sales to people who already know the company, brand, product, or service. In fact, PPC may produce as as much as -75% ROI, in other words, a loss. In controlled tests, the researchers turned off PPC advertising and found that customers clicked on organic links to reach a site. For established customers, PPC functions in a navigational role, which means they’re clicking on the ads as a shortcut to reach the site.
  • PPC increases sales to people who do not yet know the company, brand, product, or service. PPC performs an informative role, which means it informs those not-yet customers about the company, products, or services.

Therefore companies should advertise to infrequent customers or customers and prospects who do not yet know the company, brand, products, or services. But companies should not advertise to established customers.

This has implications for social. Social marketing could work in reaching new customers (it could play an informative role.)

As for content marketing, it will work if it allows prospects to discover a new company, brand, product, or service.