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In an earlier study, we reported that on average 89% of the visits to the advertiser’s site from search ad clicks were incremental. In this research, we examine how the ranking of an advertiser’s organic listings on the search results page affects the incrementality of ad clicks expressed through Incremental Ad Clicks (IAC) and as estimated by Search Ads Pause models. A meta-analysis of 390 Search Ads Pause studies highlights the limited opportunity for clicks from organic search results to substitute for ad clicks when the ads are turned off. On average, 81% of ad impressions and 66% of ad clicks occur in the absence of an associated organic search result. We find that having an associated organic search result in rank one does not necessarily mean a low IAC. On average, 50% of the ad clicks that occur with a top rank organic result are incremental, compared to 100% of the ad clicks being incremental in the absence of an associated organic result.
Some advertisers are skeptical of advertising on keywords for which they rank high in the organic search results because they believe that the majority of the ad clicks from such search ad campaigns mostly occur at the expense of clicks from organic search results. In effect, they believe that the incremental traffic from high ranking keywordstypically branded termsis low or zero.
As I understand it, the idea is that there is very little "cannibalization" if you rank organically and run Adwords. The traffic gained from running ads is incremental - adding on to the organic traffic for the most part.
[edited by: Sgt_Kickaxe at 4:35 pm (utc) on Mar 28, 2012]