Yahoo! Chases its Tail
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Written By Reprise Media | October 22, 2005 | Share This
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In what was a seemingly minor development this past week, Yahoo Search Marketing announced that they have dropped the $20 monthly minimum spending requirement associated with their Sponsored Search products. This change makes YSM’s budget policy consistent with Google’s and eliminates one of the reasons why “smaller” advertisers without substantial search marketing budgets may have elected to advertise with Google instead of Yahoo! in the past.
While an ad spend of less than $20/month may not seem terribly significant to corporations that are worth tens of billions of dollars, let’s not forget that it was the ease with which SME’s could launch a search marketing campaign that initially drove the growth of GoTo/Overture and later Google AdWords. After all, the search engines had found a way to capture dollars from advertisers who weren’t worth a sales rep’s time by creating a model that eliminated all of the human touch points involved in the advertising process. So, while each advertiser spending tens of dollars each month means almost nothing to a major search engine, the aggregation of thousands (or tens of thousands) of advertisers spending tens of dollars a month is meaningful.
Given the fact that they’ve eliminated their monthly minimums, Yahoo! has obviously recognized that they could drive incremental revenue by monetizing this long tail of advertisers. Smart decision. But it makes you wonder why they still haven’t applied that same thinking to the issue of minimum bids.
Many of our clients (and thousands of other advertisers, I’m sure) have identified huge numbers of “tail terms” — relatively low volume, low-cost, high conversion phrases composed of two or more keywords. When aggregated together, tail terms mean more value for your marketing dollar. As a reminder, the minimum bid on Yahoo! stands at $.10/click, while Google’s is only $.05/click. As a result, there are literally tens of thousands of keywords that are profitably bought on Google (at CPC’s ranging from $.05 to $.09/click), but left without bidders on Yahoo! These keywords simply don’t convert at $.10 or above, but rather than have advertisers bidding on them at lower rates, Yahoo! seems to be content to just watch them perish away altogether.
As John Krystynak noted in a recent blog entry entitled, Why Google makes more than Yahoo, if Yahoo! wants to make more money, they’ll need to make their bidding system work more like Google’s. That’s true. Yahoo! would obviously be more profitable if their average CPC’s were driven up by changes made to the bidding process. But they could also take the much simpler step of lowering their minimum bid to $.05, thereby increasing the percentage of queries that they’re monetizing.
Let’s hope that the elimination of Yahoo’s monthly minimum means that they’re waking up to this concept. Not only is dropping their minimum bid in the advertiser’s best interest, it would undoubtedly work in Yahoo’s favor as well.
Topics: Yahoo! |