Did Yahoo just raise its prices for search ads? Yesterday, Yahoo made a significant change to its advertising bidding system by removing the minimum bid for sponsored search keywords. The minimum bid used to be $0.10 per keyword. Now, the minimum bid will be set more dynamically based on two factors: the quality of the advertiser and the value of the keyword.
In theory, advertisers whose ads are clicked on more often will be rewarded with lower minimum bid requirements. But the past popularity of a keyword also goes into the equation, so a keyword that has been bid up in the past could also result in a higher minimum bid. So minimum bids have now become dynamic, and no single advertiser really knows what they are until they put in their bid for a specific keyword.
Already some search advertisers are complaining that their minimum bids have gone up 2X to 4X overnight. At this point, that is just anecdotal evidence. We will have to wait until the end of this quarter to see if the change has had any material impact on Yahoo’s revenues.
What is curious about this move is that it suggests that many keywords on Yahoo get bought at the minimum price, without any real competitive bidding going on. After all, if at least two advertisers are bidding for a keyword that means the minimum bid is no longer an issue. So it makes you wonder how effective Yahoo ad auction system is as a market. For a market to exist, there needs to be at least two bidders.
Conversely, the advertisers with the highest click through rates will now be in a position to buy up keywords below the point where lesser advertisers even hit their minimum bid. And that is not really a market either. For instance, if TechCrunch is awarded a minimum bid of $0.06 for the term “startup” and a Silicon Valley law firm needs to pay $0.15 for the same term (I am just making these up), TechCrunch could buy up the term all day at $0.06 if the law firm does not bid its $0.15. In that scenario, there would be even less competition than if everyone had the same minimum bid. But maybe Yahoo does not care so much about creating a market as it does about improving the quality of the ads on Yahoo search.
Any Yahoo advertisers out there seeing their prices go up? Any seeing their prices go down? Is this a good move for Yahoo ora bad one? Please share in comments.
- Amounts to a price increase across the board
- Result in more relevant ads, but revenue impact will be a wash
- Will result in lower ad revenues for Yahoo
Total Votes: 401
Started: April 18, 2008
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they may have changed the maximum number of sponsor links that appear on top of the organic Search listings.
For the last week, they seem to have maxed out at THREE links at the top.
Just a few weeks ago, there was a maximum of FIVE sponsor l ad inks
Is anyone else noticing the change?
Since they do not announce these things - you can never be sure
They certainly need to do something, I used to advertise with yahoo, but stopped because they where just so expensive compared to Google. For the words I wanted Google charged just 2p or about $0.04 (this is using the UK sites) yahoo charged 10p for the same words.
They will never create a competitive market for their keywords whilst ever they have such a high minimum. It seems to me that Google has the model right, but that there is also plenty of room for a few more players. They should just copy the Google model.
“In theory, advertisers whose ads are clicked on more often will be rewarded with lower minimum bid requirements.”
Erick - are you sure about this?
This is a classic self-fulfilling prophecy to selling advertising. If the *best* advertisers get more clicks, they can buy more inventory than others at lower costs, which means they get more clicks because they have more inventory, etc. etc. etc.
This system rewards incumbents and discourages new entrants. Not exactly a good strategy to follow when you need to grow the rolls of your ad base.
Yahoo’s PPC results have significantly higher rates of Click Fraud than either Google or MS. I stopped buying from them in January when 80% of all clicks I recieved were from their Network and were immediate bounces. Their system does not allow the advertiser any control over where their ads appear thus making if an all or nothing.
In addition their customer service and ad approval process makes United Airlines’ service look good.
Yahoo has and is failing in this regard by removing the Min bid they only further to alienate their advertisers and thus their revenue.
As a yahoo search partner I sincerely hope for a revenue increase! however I’m somewhat skeptical of a noticable appreciation in the next 2-3 months (hope I’m wrong)!
From our search analytics we see that about 25-30% of searches serve no advertisements (0!), and the ones that do, have about a 20% CTR. Assuming the other 70% will be unaffected by the 10 cent minimum (the average cpc is around 30-40 cents), and the average for the other 30% is around 4-5 cents, we can come up with some pretty dismal numbers (about a 5-7% increase).
Regardless, this is a downfield play that will hopefully make the Yahoo! ad network more enticing for the everyday advertiser, which will, god willing, bring in some more inventory and should definitetly boost revenue per search by more than 7%.
Congrats — entering the real game!
http://www.yahoomosh.net
Yahoo may have another matter
You compete against the search results themselves. The idea is to show fewer ads, and only show ads that people might want to click on.
This results on more clicks on higher paying ads, better user experience (less distraction), and generally more revenue.
Google is obviously reaching the end of this approach on its US site, so it’s not full of unlimited potential.
Good conversation thread. Lets support transparency for ad buyers and sellers - particularly in the Long Tail.
I’ve cross posted at: (http://adecon101.blogspot.com/2008/04/news-yahoo-tweaks-its-advertising.html)
Here is the link
My keyword bids have been unaffected. Of course, all of my bids were already over $0.10 with a healthy amount of competition.
I love Yahoo Search Advertising. The volume isn’t as big (maybe half for us), but the ROI is WAY better than google’s on broad match terms.
I think this has a lot to do with exactly what triggers ads in each network. Google Adwords uses this example for their matching. If your keyword is “tennis shoes”, then a search of “tennis shoes” will trigger an exact match of your keyword. A search of “red tennis shoes” will trigger a phrase match. And a search of “red sneakers” will trigger broad match.
But I think that is a little misleading. Sometimes it seems like what they really mean is: A search of “red foot fetish” will trigger broad match. Feet are somewhat related to Tennis Shoes, right?
But with Yahoo, your ads are only triggered by very similar keyword searches. So it consistently performs better.
And if you’re not super careful, you can waste a lot of money in Adwords.
What’s actually being done is creating a market economy where
the smaller sites will end up paying more. The larger sites can block smaller sites by buying up keywords that they possibly don’t even need anyway.
Kind of like the middle class & low class paying more for taxes & the upper class paying less. Bigger sites, already have a large traffic base, & if they buy up keywords that a smaller site needs, they are being pushed out.
Sites using Yahoo advertising will be separated quickly into class structures. Maybe it’s the right thing to do, but it’s only right w/ completely separate models for each class — Higher Trafficked Sites Vs. the Lower Volume Site, etc.
Google has been doing this for a long time. The minimums for each advertiser (for a given keyword) vary based on quality score. Higher the quality score, lower the minium bid. This is a good thing since it pushes the advertiser to create good ad copy, appropriate landing pages etc. I have seen minimum bids as high as $5 (and keeps rising everytime you increase your bid to meet the minimum) when there isn’t a good match between the keyword and the landing page.
I imagine Yahoo has something similar going on and think will help Yahoo. The ineffective ads will be filtered out increasing conversion rates improving user experience. I imagine the trend for improvement in revenue will be similar to what Yahoo saw when they moved from ad ranking based on bid alone to one based on quality score.
Rajesh
Didn’t AdWords lower their minimum bid about 2 years ago? If that was what I recall, I think overall most folks were complaining about slightly lower return.
Harry “fuzzy memory, that one is” Wang
@jbentz - I am very surprised you are getting better ROI in Yahoo compared to Google. This most likely means that your Google campaigns are not well optimized. Google ROI should be at least 3X of Yahoo. Make sure your content network is NOT turned on in Google.
I use google only.
Why is this happening? Because Google/Yahoo bidding-based PPC contextual advertising rates are simply not competitive with the market rates. The focus of advertisers everywhere is finally shifting en masse to internet sales. Competition is heating up. Competitive rates are re-emerging online. Old media or new, labor is still the most expensive expense of running a business. Whatever the medium may be, expenses ultimately remain the same. Let the games begin!
Read this blog on paper at:
http://www.feedjournal.com/pap.....sprint.pdf
Eric,
This is a great move for a lot of reasons.
I worked on the team that implemented these at Google and it’s interesting that a lot of what you say is the same sort of stuff advertisers say when looking at minimum bids on Google. Yahoo is going to have a lot of messaging issues on their hands very shortly after this launch
It sounds like Yahoo is just mirroring what Google has done in the past to improve Yahoo’s monetization. There are macro level effects in the marketplace that make this strategy make sense as well aside from the quality win they’re trying to achieve — for example, if advertisers optimize their campaigns for Google and then dump in keywords into Yahoo, it may make sense to just mimic what Google does to maximize advertiser return on Yahoo’s network.
The key point of confusion most people have is the dynamic between minbids and the real time auction.
So for example, when you state “Conversely, the advertisers with the highest click through rates will now be in a position to buy up keywords below the point where lesser advertisers even hit their minimum bid.”
This probably isn’t true. It all depends on how aggressive the bucketing is that Yahoo is going to do. Chances are Yahoo is just driving up minbids for scummy advertisers, so they probably won’t alter the mix of ads that are eligible to show up in the auction, so the auction itself in most cases will remain unchanged.
Minimum bids and real time auctions in online advertising are very different things. The real time auction is designed to reward high quality advertisers willing to pay a lot per click and the dynamics of that market place are in a lot of ways independent of the min bid system. The min bid system is designed as an economic disincentive beyond the auction to weed out scummy ads in particular. So if you have a lot of guys bidding right at $0.10 those may be ads that you don’t want to show at all because they’re low quality, and that decision is relatively independent of the market dynamics of the auction.
The critical thing to understand here is that in search advertising there is a long term sustainable advantage if you can drive relevance. Google has long been obsessed with advertising quality — NOT revenue — and so you see they have entered a virtuous cycle of having the most targeted ads, which drive the best conversions for advertisers, having users trusting their ads more, making them more likely to click on ads which then drives higher total conversions to advertisers. This in the long term drives better monetization and higher revenue.
It’s shocking to some people but doing the right thing here for your user actually does make you the most money. Yahoo is starting to mimic this, both with their Panama launch and with this minbid launch.
So if you work under the assumption that relevance is a good thing, you can consider this a Yahoo relevance launch. They’re modifying the incentive structure for advertisers who have low quality ads so that low quality ads have an economic dis-incentive that keeps them from participating in the auction entirely or from showing up on queries that don’t monetize well at all.
You really have to consider the real time auction and the minbid as two separate pieces that interact but have different goals. Looking at it that way then the impact on the auction itself should be minimal but the impact on quality could be substantial.
-Avichal
This is exactly how Google AdWords works.
This has been one of the worst strategic moves I’ve seen among the big boys. There have been changes to YSM’s policies since the beginning of 2007. Since those changes, my ad spend has dropped to half of what i was spending. And trust me, that does not mean that my CPC dropped. On the contrary, my CPC went up and i canceled campaigns that where no longer cost effective. Since that 50% drop, I’ve seen another policy change and another 40% of my ad spend has dropped.
I’m making a guess here, but i believe i will ultimately stop spending money on YSM altogether after this change takes place.
What is happening? YSM seems to be punishing the small businesses and slowly weening them out. Some “strategy guy” came on board and convinced corporate that they need to make ads all about the “customer experience.” What they forgot is that we, the advertisers paying for the ads are the customers. I agree that natural search should be about the customer experience and that is where the philosophy should have been applied.
America was built by entrepreneurs that started out as small business. In fact (stats may have changed) 90% of the US workforce comes from small business with a mere 10% coming from corporate. So if we want to fuel the economy and have these small businesses grow into large clients, this is the sector that i would focus on to improve customer experience. It is unfortunate, but i believe that Yahoo will see a large decline in revenues due to these changes.
-JB
@ 15 Rajesh.
I was referring specifically to “broad match” keywords. The ROI is way better in Yahoo for Broad Match vs Google.
I kinda feel like Google forces you to use all of the matching techniques with different bids for each. Yahoo simply does a better job of matching keywords to actual searches.
It took me a little while to realize how off-the-wall Google’s matches can sometimes be, and not my campaigns are optimized better.
And yeah, my content matching is turned off. That can be a bit tricky as well at first. Both Google and Yahoo default their ads on Content, so you have to be vigilant in turning them off. Thanks for the response.
Ahh - I’m longing for 1998. Goto.com - .01 keywords.
All I can say is that Yahoo just lost my $3,600/month spend by jacking up my rates 3x overnight. This is a lot like letting Obama run the country. A really bad idea.
Yahoo —- don’t perceive yourself as being “smart”. You will be as good as gone by 2012. Screw the customer, and they will screw you. Works every time.
Eric, to have a market, there only needs to be one buyer and one seller. There doesn’t need to be two bidders. Two bidders would make it a more competitive market, but one bidder and one seller is all that is needed to make a transaction.
It was time Yahho make a move
2000% ++++ increase in my keyword per click cost. From 10 cents to some as high as $2.50 . Is Yahoo management out of their minds ! We have starting removing the majority of keywords from our account, so we can spend are money on other sites that make us more money. Has Yahoo forgot the idea is that your customers have to make money by using their service or they go some where else with their money. The bottomline is a business must made that evil thing profit ! Our account will be closed as soon as our account balance hit ZERO. Then Yahoo will get ZERO, instead of something. Bottomline the changes are a STUPID idea on Yahoo’s part. PS We did same thing to Google a few months ago when they also got out of hand with their keyword costs.
I have used adwords, and this sounds a lot like it!
The minimum bid just wasnt done away with. It was crushed and now hiked to the moon.
0.15 to 5.00 on some keywords ??
Give me a break. What a joke…
Google Adwords still has the best system out there and noone can even compare.