An Internet retailer’s (e-tailer’s) outstanding virtual location enhances the probability of being noticed by potential customers. The notion of a virtual location for e-tailers refers to the analogy to the physical location. In the empirical analysis, an e-tailer’s Internet search engine rank as well as its advertising activities in search engines serve as proxies for the virtual location. The results suggest that it is optimal for e-tailers to complement a high search engine rank with investments in online advertising. Moreover, banner ads seem to serve as price advertising mechanism, whereas sponsored links rather seem to be used in order to signal outstanding customer service.
Häring, Julia (2005), The Virtual Location of E-Tailers: Evidence from a B2C E-Commerce Market, ZEW Discussion Paper No. 05-52, Mannheim.