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How Low Can You Go?
By Cameron Ferroni | April 30, 2008
Somewhat lost amidst the noise of the Microsoft/Yahoo! posturing over the last couple of weeks was a rather dramatic announcement by Yahoo! that they were changing how their minimum bid system worked. What struck me about this wasn’t that they had done it, it was that they hadn’t done it sooner, and at the outrage expressed by so many of their customers (particularly the ones that said they would move to Google as a result of this). Why does this fascinate me? Because Yahoo! still has one of the most transparent min-bid systems in the industry - far more understandable than Google!
First off some history. In the not too distant past, Yahoo! was perfectly predictable. If you are willing to bid 10 cents on a keyword (and you follow all of their creative rules etc) they will show your ads when people search on that keyword. It was this simplicity that people craved. Now, what that actually meant was that Yahoo! would show that ad, somewhere in their system. For all an advertiser knew, if they were bidding 10 cents for a particular keyword, they could end up in the first slot on the first page of results, they could have ended up in the 10th slot on the 1000th page of results, or in the case of a distribution partner, they might not show up at all since 10 cents might not meet the threshold of a partner. Suddenly it doesn’t seem so simple.
And for Yahoo! this didn’t make a lot of sense - it doesn’t drive a truly competitive market if you can have people just sitting at the low end. And it likely results in having thousands of ads all sitting at 10 cents for a particular keyword. So they took it to a new level. They now look at the competitive market for that keyword - what other people are bidding, and how much traffic your ads are getting - and dynamically tell you how much you need to spend at a minimum. Now you still may end up on the 100th page, but at least there is competition in the space. According to Yahoo! this can result in minimum bids trending lower than 10 cents, but that remains to be seen. It’s hard to imagine a world in which that makes sense for anyone.
But how does this relate to Google? Well, Google is even more aggressive about this than Yahoo!. At least, the world thinks so. Because Google is a complete black box. They take any number of factors into account when they tell you the minimum bid - and their minimum bid isn’t for a keyword, it is for an ad, keyword, domain name, content combination. That’s right, as best as people have been able to reverse engineer, Google looks at the keyword you are buying, and performs a complicated algorithm that looks at the ad copy, the domain name of the target, the content on the domain, the competitive landscape, and then determines what your minimum price will be. Forget 10 cents. I’ve seen instances where the same keyword, ad, content live on 2 different domains, and on one domain it will cost you 60 cents, and on the other it will cost you $10.
So what does all this mean? Well, it seems like Yahoo! is trying to figure out a way to make more money. As a public company, that seems like a totally prudent/responsible thing to do. In addition, it makes good sense from a user experience perspective - if something is valuable - a keyword etc - it makes sense to make people pay more to take advantage of it - that should lead to better and more relevant ads for users! And frankly, if the industry leader has already been doing this for years, then it stands to reason that everyone else will be trying to tap into the same kind of improvements as well…..
Topics: Pay-For-Performance, National advertisers, Local SEO, Local Search, PPClick, Advertising |