The Hidden Cost of Bidding on Your Own Brand

19 Oct The Hidden Cost of Bidding on Your Own Brand

Here’s an uncomfortable truth I’ve seen too many established brands overlook: bidding on branded keywords might be a waste of money.

Back in 2012, eBay ran a fascinating experiment with economists Tom Blake, Chris Nosko, and Steve Tadelis. They shut off paid search ads in certain regions while keeping them active in others. What they discovered was eye-opening. When brand keyword ads like “eBay shoes” were turned off, sales didn’t go down. Customers found eBay anyway through organic search. In other words, the ads were redundant.

Non-brand keywords performed a little better and brought in some new or infrequent users, but even then, the return on investment was negative. When all the numbers were tallied, eBay’s overall ROI on paid search was -63%. They were essentially paying for clicks they would have gotten regardless.

This experiment validated something I’ve been teaching for years: strong brands don’t need to buy their way back into their customers’ minds. If your customers already love you, they’ll find you. They’ll type your name directly into their browser. They’ll recommend you to others because you’ve earned a place in their identity. As I wrote in Customers First, the customer creates the brand. 

Now, that doesn’t mean paid search is useless. It can be valuable for reaching new audiences with non-brand keywords, protecting your brand from competitors, or helping younger brands gain recognition. But for established brands, I believe the smarter play is to redirect that spend into strengthening your culture, building your customer community, and creating the kinds of experiences that get people talking about you.

That’s money you’ll never regret investing.