Yahoo's New Quality Based Pricing Looks at Conversion Rates

 

Yesterday, I reported at Search Engine Land the launch of Quality-Based Pricing. In short, Yahoo will now begin to give advertisers a percentage discount, based on the ad's quality.

What makes up the quality of the ad? Yahoo told me, "publisher conversion rates, traffic source and implementation type." Now this is not live across all keywords yet, but will be in a few months.

When Yahoo told me the criteria, I had to take a second look. Did Yahoo say "publisher conversion rates?" Yes, they did. So I asked Yahoo for more information.

Yahoo is looking at how a publisher may convert for advertisers and adjust the pricing of the ad based on that. I asked Yahoo to clarify:

Rather than the overall number of leads sent to advertisers (conversion rates), the publisher conversion rate is the number of leads that the publisher send to advertisers that actually result in a conversion (e.g., a sale, a sign-up, etc. - whatever the advertiser has defined as a conversion event).

So it is not based simply on click through rate. So I asked what happens when an advertiser doesn't set a conversion metric? Well, since it is based on the "aggregate performance across the Yahoo network," even if one advertiser doesn't set a conversion metric, others probably will and they can use those data points in determining the pricing of the bids.

What do the forums think? Here are some quotes:

Publisher's perspective:

So much for YPN paying out so much better than Adsense.. All of that is over..

As an advertiser this is good news.

I think YPN first needs more the advertisers than the publishers. That's why they are doing this, to keep the comfort level of advertisers. They can run ads in their search engine too

This is just like Smart Pricing in AdSense, if you have low quality traffic (converts badly), you will get paid less.

Forum discussion at Search Engine Watch Forums, WebmasterWorld - YPN, WebmasterWorld - YSM and DigitalPoint Forums.

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Comments:

Fritz

06/05/2007 01:56 pm

Alternatively and, as I think, more benefitially advertisers should consider switching to graphical ads (vs. contextual) on tagclouds - something Quintura already offers. Send in a query to see hyperlinking icons beside tags.

Vygantas

06/05/2007 02:28 pm

They should fix their ads displaying problems first as mostly their ads are far far away from the site content in which it's being placed.

Kevin

06/05/2007 04:39 pm

Advertisers do not want to pay less for unwanted ad click traffic ("smart pricing", "quality-based pricing", they want to eliminate it - and in most cases, it is up to advertisers to mitigate it. The key issue is that Google and Yahoo understand the value of this traffic is extremely low and borders on invalid and fraudulent - yet, they hesitate to eliminate it and instead charge less and retain a large portion of the revenue and profits associated with this unwanted ad click traffic. Advertisers need (and in some cases have a fiduciary responsibility to their shareholders and boards) to monitor their ad click traffic using a 3rd party auditor. Kevin Embree SVP, Product Strategy Click Forensics, Inc. Click Forensics was voted "Best for Fighting Click Fraud" by Inc magazine in 2007.

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