The Google-ization of Yahoo! Continues

“Minimum bids no longer fixed at $.10 for Sponsored Search”

This week Yahoo! announced a change in its minimum bid policy for sponsored search keywords. In the past, the minimum bid and minimum click cost was fixed at $0.10. So regardless of relevancy, quality score and competition you could bid a dime and your ad would be served.

Here’s the downside of the old policy: When bidding $0.08 on a keyword in Google you’d see a CPC of $0.05, for example. Under the old system, Yahoo! would force a minimum CPC of $0.10. That’s double what is cost on Google. On the low end, Yahoo clicks were actually more expensive than on Google, contrary to what we see today on higher cost keywords.

So, the new Yahoo! policy should reduce costs to advertisers on the extremely low end as long as relevancy and quality score are high and competition is low. That’s the good news.

The components of Yahoo’s minimum bid determination include Quality and Value, both very subjective and cloudy concepts. Quality, a la Quality Score, is a fairly well known concept in both Google and Yahoo! How Quality Score is determined is a well guarded secret. Kinda like the Big Mac special sauce. Sure, it makes the sandwich taste better, but we can’t get the recipe.

Yahoo! now adds what it calls “Value” to the mix when calculating minimum bids. The Yahoo! Search Marketing Blog states: “While figuring out the value of a keyword can be complicated, we may look at a number of things to determine what it’s worth.” Yikes, not much transparency there.

The danger of the bid pricing system lies in Yahoo! setting the new minimum bids artificially high. The new system hides too many elements behind the proverbial curtain. By taking a page out of the Google playbook, Yahoo! can now demand higher minimums and command higher bids in general. Just what their bottom line needs.