In this paper, a large-scale study on users' understanding of search-based advertising is presented. It is based on (1) a survey, (2) a task-based user study, and (3) an online experiment. Data were collected from 1,000 users representative of the German online population. Findings show that users generally lack an understanding of Google's business model and the workings of search-based advertising. 42% of users self-report that they either do not know that it is possible to pay Google for preferred listings for one's company on the SERPs or do not know how to distinguish between organic results and ads. In the task-based user study, we found that only 1.3 percent of participants were able to mark all areas correctly. 9.6 percent had all their identifications correct but did not mark all results they were required to mark. For none of the screenshots given were more than 35% of users able to mark all areas correctly. In the experiment, we found that users who are not able to distinguish between the two results types choose ads around twice as often as users who can recognize the ads. The implications are that models of search engine advertising and of information seeking need to be amended, and that there is a severe need for regulating search-based advertising.
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