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360i Report: The Bing-Yahoo! Search Alliance & PPC

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360i Point of View on
The Bing-Yahoo! Search Alliance & PPC
Overview
Many advertisers have been asking the same question since the Search Alliance was announced in July 2009: “What does this mean for the ROI on my search campaigns?” Answering this question is difficult, if not impossible. The Search Alliance has many hidden complexities. While the expected increase in competition within adCenter may cause CPCs to rise over historical norms, in some cases there may be a net decrease over CPCs paid for the same term on Yahoo!’s Panama. In this POV we give consideration to a few scenarios we foresee and highlight several actions and decisions that advertisers should be prepared to make as a result.
1) adCenter competition, and thus, adCenter CPCs will increase, but impact should be minimal

Observation, backed by actual research, suggests there is a significant disparity in advertiser use of Yahoo! Panama and Microsoft AdCenter. As a result, the natural expectation is for Yahoo! advertisers, who do not currently use adCenter to migrate to the adCenter platform. The impact of additional competition within adCenter suggests cost-per-click (CPC) should rise. However, there are many unique variables which independently impact each advertiser.

What should you expect? Depending on the exact vertical, the competitive impact will likely vary. For example, retailers and financial services brands may stand to see very little CPC inflation as these categories are generally more mature on adCenter. CPG may experience more of an impact given lower category adoption of adCenter. Regardless, each category and each advertiser will see an impact on CPC. Beginning in October, daily and weekly competitive performance indicators, such as CPC and position, should be monitored closely.
2) A unified platform could expose cost savings

In the evaluation of cost and CPC, many sources have focused on increased competition within adCenter as a lone variable. Very much overlooked when considering the alliance is that adCenter is different from Panama, and performance metrics for a given keyword on adCenter are different from comparable metrics for that same keyword on Panama. Looking at a single advertiser’s CPCs on Yahoo! vs. Bing, we see the Bing CPC is 75% less than the Yahoo! CPC. We also observe a CTR which is 52% higher as a result of Bing’s ad serving algorithm (stats via SearchIgnite’s Q3 2010 Search Market Report).While the CPCs for this term may see minor increases increase on a unified adCenter platform with the influx of competition, is it likely to outpace the current CPCs paid on Yahoo!’s Panama? Possibly, but not likely when you also factor in the increased queries that adCenter will be able to serve to Yahoo! users coupled with potential of Bing’s algorithm.

This deviation in actual cost plays out for nearly every keyword in every campaign for every advertiser. It also varies greatly between brand terms and non-brand terms. Advertisers must consider many more factors than competition when estimating impact and thinking about the future of their search campaigns. Maybe, just maybe, there are cost savings in the mix.
3) Performance volatility is expected, but should be minimal

A fundamental shift of roughly 30% of any market will inevitably shake things up. This volatility should stabilize relatively quickly for most advertisers.

The phased transition of inventory should assist in masking volatility. Microsoft’s goal is to serve:
10% of Yahoo! impressions by end of week 10/3

30% of Yahoo! impressions by end of week 10/10

60% of Yahoo! impressions by end of week 10/17

100% of Yahoo! impressions by end of week 10/24

Should they be successful with this approach, there is little expectation we will see rapid or sudden alteration in performance metrics.

Additionally, the rate and degree of volatility is complicated by unknown timing of advertiser migration. Many smaller and less-sophisticated advertisers may be slow to consolidate or react to the Search Alliance. Furthermore, many advertisers may find the united traffic volume and/or management complexities to be misaligned and abandon the market all together. Both of these scenarios could cause minimal blips well past the October transition period.
4) Keyword value and positions will change

Due to consumer behavior, competition and countless other factors, advertisers experience vastly different performance on Yahoo! and Bing. As a result, the value of a keyword varies considerably for each platform, and subsequently, they are managed uniquely. In the coming weeks, this ability dissipates. A single keyword on adCenter will represent what was previously two unique keywords. The potential downstream effects to performance are complex and will vary widely.

To illustrate, we’ll look at a fictitious example. The below table represents a single keyword’s unique performance:

Assuming this keyword is meeting goal at 5:1 ROAS, it is doing so at position 6 on Yahoo! and position 2 on Bing. As we approach the Alliance advertisers must be prepared to quickly re-evaluate optimal CPC and position.

Ultimately, advertisers must prepare for the convergence of volume. Those who are accustomed to seeing the same average position every week should prepare to see change as new optimal positions are sought. Fortunately, Microsoft’s phased integration of inventory will considerably minimize instability.
5) The alliance unifies more than just publishers

One of the lesser discussed components of the Search Alliance is the pending unification of MSN and Yahoo!’s search syndication networks. This move will force most advertisers into making some short-term decisions.

Both Microsoft and Yahoo!, like Google, have viewed syndication opportunistically to provide growth and increase market share. Yahoo! provided the ability to block select domains when it launched Panama in 2007. Microsoft has never developed domain blocking controls. While the capability to block domains is on the Microsoft development list, it appears that initially, all campaigns will revert to an “all or nothing” approach. This could dramatically change performance for those advertisers who have used domain blocking to improve their performance within the Yahoo! syndication network.
These advertisers must decide between traffic that may be less optimal or opting-out until domain blocking is available. Advertisers choosing to stay may be rewarded with key early benchmarks and valuable history. Additionally, there could be lower competition as other advertisers walk on the opportunity. Those advertisers opting out will face the cold reality of lost volume. Not only Yahoo!’s network, but also Microsoft’s network which they may find attractive. Additionally, they will face future decisions as to when to plunge back in.
6) Richer ad format falls temporary victim to the Search Alliance

Yahoo! Rich Ads in Search (RAIS) will be unavailable as the Search Alliance transition concludes. The ad format is expected to again be available in early 2011. At that time, RAIS is intended to be fully integrated into adCenter with expanded reach showing on search results for Yahoo! Search and Bing.

The news is unfavorable for advertisers who may leverage RAIS as a solution for integrating offline creative assets or for expanding their message to support multiple objectives. Retailers are among those expected to find the announcement most untimely at the onset of the holiday season. For performance impact, we encourage advertisers to evaluate on the basis of a unified platform rather than a simple comparison of Yahoo! RAIS to Yahoo! Sponsored Results. The performance expectations will vary depending on the many nuances and external factors existing between Yahoo! Panama and Microsoft adCenter.

How marketers can prepare for the alliance
Anticipate: Understand the impact issues within this article can have on your campaign.
Prepare: Have a basic knowledge of high volume terms which will move the needle and their CPC differences on adCenter vs. Panama. Monitor them closely as the transition of inventory occurs.
Optimize: React. It shouldn’t take long to adjust. Move quickly.
Change is coming — and the scope and degree of changes caused by the Search Alliance remains opaque. However by preparing, knowing what to expect and reacting quickly, advertisers can emerge on the other side just fine.

Next Steps

Contact your strategic advisor at 360i for more information on how the Bing-Yahoo! Alliance stands to influence your brand’s search marketing efforts.