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.
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.
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.
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.
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.
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!
Senior Business Analyst