Determinants of online sellers’ advertising: An empirical study on Chinese C2C market

This paper studies the determinants of sellers’ paid search advertising adoption and their spending on the advertisement. Based on the theory of advertising, we proposed the hypotheses. By an empirical study on a unique dataset of the largest e-commerce platform in China, we find the U shape of the relationship between sellers’ reputation and their decision on advertising. Compared to the sellers with medium reputation, the sellers with low and high reputation are more likely to use paid search advertising. And the more loyal customers a seller has, the less chance he adopts paid search advertising. Meanwhile, for those sellers that decide to use paid search advertising, the increased page views with spending on advertisement during last period makes the seller spend more in this period. This study contributes to the advertising literature by providing empirical evidence how sellers make decision on using paid search advertising. And it also provides some managerial implications to the e-commerce platform