Beware the “Spillover” Effect: Your Online Ads Could be Helping Competitors

Establishing a strong online advertising presence would seem like a no-brainer to most CEOs these days, whether they're running companies that are large or small, customer-facing or business-to-business.

After all, companies that don’t will risk getting trampled by competitors whose brand names are constantly flashing in front of the eyes of the world’s 3.2 billion Internet users.

But what if online advertising actually helped your competitor more than it helped you?

It may seem like a strange proposition at first, but new research from Navdeep S. Sahni, an assistant professor of marketing at Stanford Graduate Business School, shows that CEOs and their marketing managers should think twice about what they’re putting on the web.

After analyzing online ads in the Indian restaurant industry, Sahni discovered what he refers to as the “spillover effect”, a phenomenon where a company’s ad unintentionally promotes a competitor.

Sahni’s research, encompassing 189,650 customers over a four-month period in 2010, found that the positive effect of an ad across hundreds of competitors’ sales was up to five times greater than the positive effect on the company doing the actual advertising.

“If you see one product, it may remind you of other similar competing products.”

“If you see one product, it may remind you of other similar competing products,” Sahni reported in Stanford’s management blog.

He conducted his research in collaboration with an Indian restaurant review website, which allowed customers to search thousands of eateries by type of menu, ratings and reviews. The site featured an array of organically arranged listings, as well as ads by individual restaurants.

Running an ad increased the sales leads of competitors by an average of 4%, a significant boost, given that each business had multiple rivals in the same market. Competitors that benefited most, with an up-to-25% boost in sales, offered similar cuisine to the advertiser, but had higher ratings scores on the website.

Sahni—who believes his findings are relevant to business more broadly—said the best way to get around the problem is to remind customers what makes your brand or business special. This could involve quoting a particularly positive review or emphasizing a key element of your value proposition, such as offering low prices.

And it appears that issuing ads more frequently can help make a better impression on the customer, too.

Sahni found no evidence of spillovers among customers exposed to an ad more than three times.


  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events


    Strategic Planning Workshop

    1:00 - 5:00 pm

    We are in a period of rapid change. Customer needs, technologies, competitors and internal capabilities require companies to review and update their strategies for the new realities. In this workshop, strategy experts Steve Rutan and Denise Harrison will show you a systematic approach to strategic planning to help you refine or redefine your business strategy and approach including:

    • Learn what you need to know to develop an effective strategic plan. Put the right players on the strategic planning team.
    • Develop strategies that leverage your company’s unique position in the marketplace. Lift your management team beyond “business as usual” thought processes and activities.
    • Translate your strategies into action. Achieve your vision for success and generate superior financial results.
    • Identify exactly what you need to do now to position your company for future success.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.