Concerns Over Yahoo!'s New Quality Based Pricing

 

The other night Yahoo! released a quality based bidding methodology to their ads. What that means, as I explained, is that Yahoo will give advertisers a discount on their bids based on several metrics, including how a publisher converts on the whole.

Converts? Yes, a conversion rate. Which means, Yahoo is tracking to see if a publisher's ad will ultimately lead to a conversion. Conversions include a goal (sales form completion, lead generation, etc.) or a sale on a site.

If a publisher produces lower conversions related to other publishers in a specific keyword marketplace, Yahoo will take notice. Then Yahoo will discount the bid price, and refund the advertiser money for those clicks. Many compare this to Google's smart pricing, but I have not seen Google come out and say they are using conversion metrics to determine a price of a click.

The discussion on how Yahoo is using a bit too much information to price ads has already begun at Search Engine Watch Forums. I admit, I kind of fueled the discussion, but I was honestly shocked and a bit concerned when I learned Yahoo was using such metrics.

(1) If Yahoo! is tracking conversions and admittedly discounting prices based on that, who is to say they won't do the opposite? Who is to say Yahoo wont look at higher converting publishers and up the price on those clicks?

(2) If Yahoo! will go that far, why not take it a step further and share in an advertiser's success. By that I mean, increase the prices of ads for higher converting and more profitable advertisers.

My list can go on. But these are just some of the initial concerns that came to mind when I first heard this announcement. I had four emails to Yahoo!, with five responses. If this was Google, the noise in the forums would be a lot louder.

Forum discussion at Search Engine Watch Forums.

Update: See Yahoo Addresses Concerns Over New Search Ad Pricing Model for an update to this article.

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Comments:

Jojo

06/06/2007 12:45 pm

Isn´t Google making the same and conversion rates are part of AdSense Smart Pricing?

Barry Schwartz

06/06/2007 12:49 pm

JoJo, Show me where Google said that publicly please.

rob

06/10/2007 05:03 am

Q2 numbers for Panama will be a disaster, gimmicks or no gimmicks. As an investor I have to ask: Where are the layoffs?

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