ACM study: Paid rankings: effects on consumer welfare
ACM argues for more transparency in Online Retail with regard to higher rankings on online market places or shopping malls. ACM has investigated ‘paid listings’ on Online Marketing platforms for Retail. Paid ranking or listing means that providers pay extra for a better place on certain platforms. ACM has studied whether this is disadvantageous for the parties involved (consumers and retailers) and whether paid ranking is effective. The survey information was obtained by contatcing the platforms and by measuring purchasing behavior as a result of paid listing. Also literature studies contributed to the research.
ACM states that paid ranking is limiting competition between providers on price and quality. This means that vendors pay a lot of money for limited insights. This in fact be seen as shooting in the dark. Consumers will not see the best offers, but instead the offer for which additional payments have been made or at least the offers to the preference of the platform. The recommendations by the platforms will therefore be less relevant due to the extra payments and will not show the “best deal” for the consumer.
This has now been accepted by many consumers. The conclusion we can draw is that both consumers and providers pay too much to get in touch with eachother.
By providing insight into the market, both retailers and consumers could make a better decision whether or not to advertise or to purchase. The paid positions could also be shown separated from the other offers. Consumers who are used to the ads can make a quick purchase. Consumers who want to do more extensive research can also be helped by this, because the complete information is available (somewhat hidden, perhaps).