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An Empirical Analysis of Seller

Advertising Strategies in an
Online Marketplace
INFORMATION SYSTEM RESEARCH VOLUME 31, NUMBER 1

PRESENTATION BY DILLON CHRISTANO ( 郭廷偉 )/611235204

Author: 2

Haoyan Sun

Ming Fan

Yong Tan
Introduction 3

 Online store like amazon, eBay, seller must pay to start selling product at the
website, but in China Taobao have different method, where seller shouldn’t pay to
start selling.
 In March 2015 Taobao had 350 million active buyers and over 10 million active
sellers, generating a combined gross merchandise value of US$394 billion.
 Taobao seller, have a big challenge to sell their product, where they must invest
advertisement to keep showing on the top of the search so they can sell it easily.
 While Amazon and eBay adopting sponsor to advertise and increase sales in the E
commerce.
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 This study will research about the effectiveness of sponsored search and social
media endorsement to increase traffic and sales for sellers at Taobao
 The study also find the important implications of advertising on E-commerce
platform.
Importance of this research 6

 This study is important because this study want to know can sponsored search
work or not in retail e-commerce.
 This study aim is also achieved it by examining how sponsored search works on a
retail e-commerce platform.
 And the study can explain does endorsement can also work on retail e-commerce.
 The study contributes to the literature in two important ways:
1. Provide interesting results on how advertising tools work together in affecting
individual sellers’ traffic and sales.
2. Advances the understanding of the two advertising tools by identifying a key
contingency and seller reputation.
Background and Motivation 7

 The way to advertise in Chinese e-commerce platform different and the price of
the advertisement is based on the click when the user open the product page
 The researcher want to know the performance of sales when use that way to
promote.
 The research also want to know does endorsement on social media works.
 In the last study endorsement on celebrity work on book sales and it work very
well.
Research objective 8

 The researcher want to know the performance when seller use click per rate to
promote a product.
 The researcher want to know does endorsement on social media works
 The researcher want to know the best marketing strategies to sell on a retail e-
commerce platform and does amazon and eBay strategy can be used.
 The research also want to know the impact of traffic to sales on e-commerce.
Research Method 9

 This study research method is measuring the performance of sales, and the sample
is seller that sell product in woman fashion category.
 The total sample is 3,620 randomly sampled sellers in the women’s fashion
category.
 The study also use the sales data from May 2011 to February 2012 for supporting
the study.
 Hypothesis 10

Sponsor Search:
1. Sponsored search advertising has a positive effect in attracting traffic to an online store.
2. Sponsored search advertising has a positive effect in increasing online sales.
Social Media Endorsement:
3. Social media endorsement has a positive effect in increasing online traffic.
4. Social media endorsement has a positive effect in increasing online store sales.
Sponsor Search, Traffic and Reputation:
5a. Sponsored search is more effective for sellers with higher reputation in attracting traffic.
5b. Sponsored search is more effective for sellers with lower reputation in attracting traffic.
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Social Media Endorsement, traffic and reputation

6. Social media endorsement is more effective for sellers with higher reputation in
attracting traffic.
Trafic Conversion and Sales:
7. Sponsored search is more effective for sellers with higher reputation in
increasing sales.
8. Social media endorsement is more effective for sellers with higher reputation in
increasing sales.
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Variable 13

 Traffic
 Sales
 Reputation
 Tenure
 Repeat Customer
 Product Variety
 Average Price
 Social Media endorsement
 Sponsor Search
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Discussion and application

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 Because of the data result shows unbalance data from 3620 sample the researcher eliminate some sample and they decided to use
2859 sample out of 3620.
 Analysis per Variable:
1. Traffic is dependent variable and is highly skewed, as the standard deviation is much higher than its mean.
2. Sales capture how many unique visitors made the purchase on the seller’s website and the result is same as Traffic.
3. Sponsor search data is coded 1 for seller use Sponsor search and 0 for not use it. The average is 0.59, it shows that more than
half of sellers used sponsored search.
4. Social Media Endorsement data is coded 1 for seller use it and 0 for not use it. The average is 0.47, it shows that less than half of
the sellers used.
5. Reputation indicates how well the sellers perform, and measure based on the review of each transaction. It coded 1 for positive, 0
for neutral, and -1 for negative. Each sample reputation is sum and it is the result.
6. Tenure Indicates the days that seller join and starting sale on the platform, the average of it is 3 years or 908 days, the maximum
is 8 years or 3188 days.
7. Repeat customer indicate the customer that bought more than one time, and the result is it is skewed because the mean is lower
than the standard deviation.
8. Average price shows the product positioning because it is the average of the price that the seller given.
9. Product Variety indicates variety of product category in the shop and the data average is 299.79 and standard deviation is 719 it
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 The study show that distributions for traffic and sales

are similar, with both highly skewed.
 The traffic and sales are highly correlated with a
correlation coefficient of 0.86.
 The study also show that sellers using sponsored
search advertising have more traffic than using social
media endorsement,
 If sellers using both strategies it can attract even more.
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 From sponsored search equation, the negative and significant coefficient estimated on
Lag 1: (α = −0.003, p < 0.05) and lag 2 (α = −0.002, p < 0.10) shows us that sellers like 21
to adopt sponsored search if they couldn’t get enough traffic in the last periods.
 The coefficient estimated on traffic at both Lag, are both negative and significant, it is
because the results also show that the adoption of the strategies also tend to be consistent
over time.
 From sponsor search adoption at lag 1, are significant and positive, it shows that they
used sponsor search if they use it or using social media endorsement last period.
 But based on equation of social media endorsement at lag 1, has significant and positive
effect on lag1, which it shows that they still use social media endorsement, but they also
use sponsor search.
 The result show that there are no significant effect on traffic to both strategies, but from
seller perspective there are coordination between 2 of the strategies to increase it for
long-term period.
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Discussion and implication

 From the analyses confirm that both sponsored search and social media endorsement play important roles in
increasing traffic.
 Sponsored search and advertising being more effective than social media endorsement.
 The study shows that sellers have both sponsored search and social media endorsement can attract more
traffic, because potential customer can see those two advertisement.
 For the low-rate seller, sponsor search can increase the traffic while high-rate seller can increase sale.
 And social media endorsement increases traffic for sellers for increasing seller reputation,
1. Sponsored search is a more effective than social media endorsement in increasing 23
traffic and the most important is increasing sales for seller. It happened because
sponsored search have more strength to attract customer.
2. Sponsored search is more effective for increasing traffic for sellers that have
lower/low reputation, while sellers that have higher/high reputation, increase their
sales.
 (New sellers aim is to increase their reputation scores in the long term, but they need
to engage with more effort, and they must have good selling strategy.)
3. Low-reputation sellers should not expect significantly increase in sales from social
media endorsement, because it just increase the traffic
4. Platform must understand the roles of various sellers in the multisided market and
produce good strategies to attract seller to sell the product to the platform.
Conclusion 24

 This study examine how the choices of two important advertising strategies
provided by the platform affect online traffic and sales for heterogeneous sellers.
 The study finding reveal the effectiveness of the two strategies, the substitutive
nature and the effect of the strategy.
 Implication also not only for sellers but also for the platform organizer.
Future research 25

 There are possible extension of this study:

1. Seller reputation mechanism of Taobao is from feedback in every transaction,
where eBay reputation come from percentage of positive feedback.
2. The sample is limited to one product category (Woman fashion)
3. The study data set only provides information on sellers behaviours study not able
to see the dynamics of the seller–buyer interactions