Yahoo Eliminates Minimum Bids

April 21, 2008

Yahoo2Yahoo announced in February that they were going to start eliminating minimum bids for paid search results. Historically, Yahoo has charged a minimum of $0.10 for every click. For our retailers, this has long been a sore point with Yahoo. The terms most likely to cost less than $0.10 are brand terms. Brand terms tend to get clicks when someone is looking for your brand. In many cases, the searcher is using the search engine and paid search as a way to navigate the web, rather than simply typing the website into the browser address bar. And for retailers with a  strong brand, clicks on brand keywords can be a significant portion of paid search revenue. For example, Calumet Photo gets a lot of paid search clicks from searchers who type in the word “calumet”. Clearly these searchers were looking for the Calumet site, but might not have known the actual URL, or have just gotten in the habit of searching on Google or Yahoo for any site they want to navigate to. Unlike Yahoo, for some time Google has charged Calumet Photo very little for these clicks. These brand keywords have very high quality scores because of the high click through rate, and high relevancy between the keyword, ad, and landing page.

On April 17th, Yahoo announced that the minimum bid had been eliminated. For brand terms, this should mean an immediate decrease in the actual CPCs being paid. I have several clients who pay between $0.02 and $0.04 per click for brand terms on Google. I checked today to see how they were doing on Yahoo. Unfortunately, clicks are still roughly $0.10 per click. So, either the change hasn’t rolled out to all clients yet, or Yahoo’s algorithm is not giving these keywords enough quality score to reduce their click cost significantly.

At the end of the day, this feature is a good thing for retailers and Yahoo. My clients will be able to take the money they save on brand terms and spend it buying more keywords related to products and services, which should increase total revenue and ultimately lead to more paid search advertising.

As an aside, you might wonder why you should advertise on your brand terms in the first place. If, after all, the searcher is looking for you, then why should you pay Google, Yahoo or MSN for a visit you would probably get from the natural search results or from the buyer typing your URL in the address bar of the browser? We have done several studies that show that the conversion rate is much higher for paid ads than natural ads alone, and that overall revenue suffers when brand ads are turned off. So, for most retailers, the brand ads more than pay for themselves. In some ways, this is logical. Conversion is higher when the buyer sees your name in multiple places and this includes on search results pages. If your paid ad is next to your natural listing, conversion is better for both. In addition, you can craft your marketing message more carefully and update it more often with a paid ad, for example to promote a sale. Natural listings depend on the web crawler for updates.

written by Jason James — jason.james at channeladvisor.com