Over the last year as Bing and Yahoo have migrated to share the AdCen­ter plat­form, the two engines have seen a decrease in both spend and click share. As quan­tity has decreased, qual­ity has increased with RPCs (rev­enue per click) up. The widely pre­dicted CPC (cost per click) increase has mate­ri­al­ized but largely because of improved qual­ity, not because of the increased num­ber of com­peti­tors as was expected. This qual­ity improve­ment is the key fea­ture of the YaBing plat­form and has come about because of a culling of the part­ner net­work – vol­ume has shrunk dra­mat­i­cally while rel­a­tive qual­ity has increased to be on par with Google.

Shrink­ing Volume

The alliance tran­si­tion com­pleted in Q4 2010, at which point Effi­cient Fron­tier saw a drop of 5.5% in share of spend going to both Bing and Yahoo. Through­out 2010, Bing held largely con­stant as Google essen­tially took share from Yahoo, fur­ther­ing Google’s dom­i­nance of the market.

These aggre­gate num­bers mask a sig­nif­i­cant vari­a­tion within dif­fer­ent ver­ti­cals. Look­ing at four of Effi­cient Frontier’s largest ver­ti­cals, we see as much as a 20 per­cent­age point dif­fer­ence between retail — a Google strong­hold (Yahoo/Bing 10%) — and Finance (Yahoo/Bing 30%), a long-time Yahoo power. The aggre­gate direc­tional changes we’ve seen will have to be looked at in the con­text of your spe­cific busi­ness to assess the opportunity.

1

The vol­ume drop on Bing/Yahoo can be seen clearly through the tran­si­tion in the chart below. Start­ing in Sep­tem­ber and through the end of the year as traf­fic was being switched over from Panama to AdCen­ter, the per­cent­age of clicks com­ing from the two engines dropped steadily – 21% overall.

2

At the same time we saw the qual­ity of the traf­fic improve sig­nif­i­cantly. Rev­enue per click showed a steady upward trend over the four-month period.

3
The source of both the vol­ume decrease and qual­ity increase is sig­nif­i­cant changes to Yahoo’s part­ner net­work. As dis­cussed in other posts, a huge part of Yahoo’s traf­fic comes from part­ner sites. These have tra­di­tion­ally con­verted at a much lower rate than traf­fic from search​.yahoo​.com. Our data shows a strik­ing increase in the mon­e­ti­za­tion qual­ity, as mea­sured by rev­enue per click (RPC) of the part­ner traffic.

4

In March of 2010, rev­enue per click from Yahoo part­ners aver­aged 40% of the Yahoo’s over­all RPC. This com­pares to Google, whose much smaller set of part­ners (includ­ing Ask​.com) con­verted at 80% of the over­all RPC. After the alliance was com­pleted we saw Bing-Yahoo RPCs at a sim­i­lar level – about 80% of over­all CPC.

As a side note, this improved traf­fic stands to ben­e­fit Bing and Yahoo as they no longer have to sub­si­dize poor part­ner traf­fic. AdCen­ter pro­vides great tools for man­ag­ing the part­ner net­work, but we believe that many if not most users will set a sin­gle bid on the AdCen­ter plat­form. That bid will be based on the aver­age rev­enue per click across part­ners’ sites as well the “owned and oper­ated” sites (i.e. search​.yahoo​.com and Bing​.com). If part­ner traf­fic is pulling down the aver­age con­ver­sion rate, adver­tis­ers will lower their CPCs accord­ingly. In essence, bing​.com and search​.yahoo​.com will be sub­si­diz­ing the poor net­work traf­fic. Addi­tion­ally, Bing and Yahoo have to share some per­cent­age of the click value with these part­ners fur­ther under­cut­ting their rev­enue. The smaller, higher qual­ity part­ner net­work we see today, com­bined with tools for con­trol­ling bids on the part­ner net­work just makes good busi­ness sense both Microsoft and Yahoo.

So what should one do?

  • Look at your data. As illus­trated above, the rel­a­tive per­for­mance of the dif­fer­ent engines and their respec­tive part­ner net­works varies greatly by industry.
  • Make sure you are present on all parts of the AdCen­ter plat­form. This means full key­word cov­er­age as well as con­tent. Why spend hours try­ing to eek more per­for­mance out of exist­ing key­words when you can get a sig­nif­i­cant vol­ume lift by just hav­ing a full pres­ence on search key­words and con­tent themes. Con­tent on AdCen­ter in par­tic­u­lar is a sig­nif­i­cant oppor­tu­nity that is ignored by too many people.
  • Man­age the part­ner net­works. Part­ner traf­fic is huge and even though Yahoo’s net­work has improved, it requires close mon­i­tor­ing. Exclude under­per­form­ing domains and con­sider bid­ding on it sep­a­rately. Do not turn off the part­ner net­work unless absolutely nec­es­sary – remem­ber presence!

–Shay O’Reilly
Senior Busi­ness Analyst