Yahoo! Search Marketing has changed the rules of their game again. Until last week the minimum bid for sponsored search keywords was a fixed $.10. Now Yahoo! has decided to remove this fixed minimum bid. Over the next few days they will induct new minimum bids for keywords.
The minimum bid amount for each keyword may now be above or below $0.10. Account holders will be informed about the changes in due course.
Sources at Yahoo! explain that the new minimum bids will be like the reserve prices held at auction houses. This price will be based on a variety of features such as quality and value. If the quality of an ad is good and it receives more clicks than those of its competitors, it will receive a higher ranking and the minimum charge will be lower.
If the ad quality is poor Yahoo! will charge more by raising the minimum bid, but will still keep running the ad, which seems to show that they do not really care about quality if the advertiser can pay for it.
Keyword value is calculated using the number of advertisers bidding on the word and the amount they are willing to pay for it. Ads will be displayed for a keyword when the advertiser’s bid equals or exceeds the minimum bid fixed for it. If the advertiser’s bid falls below the minimum amount required the keyword will be inactivated.
Account holders will be informed via the Yahoo! Search Marketing dashboard about these changes and they will be allowed a grace period to make the necessary bid adjustments to keep their keywords active. The new system will be similar to Google’s and is likely to increase Yahoo!’s revenue at least in the short term, as it seems unlikely that the minimum bid for any word will be set below $0.10.
In the long run, however, it is possible that advertisers may go elsewhere rather than pay an exorbitant charge for ad placement on Yahoo!, in which case Yahoo! may end up being the ultimate loser. Advertisers will also have no way of knowing what their competitors are being charged and the level playing field that most advertisers liked about Yahoo! Search Marketing will now be completely lost.
A number of advertisers are already complaining that the new bids have overnight been increased by 2 to 4 times the earlier price and they think it is especially wrong to do so in the given market conditions.
Jim Phillips, one of the many unhappy customers that commented on this announcement, said “I will eventually pull ALL my business from Yahoo! if this is the same as Google. What they are really doing is punishing the advertisers for a slow economy and poor ad revenue from click through. So you pay a LOT more for the few clicks you might get vs. all the impressions you get.”
A number of advertisers also saw the move as a poor way to induce Microsoft to increase the amount they pay to acquire Yahoo! While that may not actually be the case, it has still left the few advertisers that still use Yahoo! Search Marketing quite unhappy.