Yahoo!-Google Partnership to Raise Cost for Marketers, Keyword Prices on Yahoo! Could Jump over 20% According to SearchIgnite Report

2008-07-15 07:30:00

ATLANTA–(EMWNews)–New data reveals that Yahoo!s decision to

outsource some of its search advertising to Google will likely raise

average keyword prices on Yahoo! for most marketers. The findings come

from the latest quarterly study released today from SearchIgnite, a

leading provider of search and auction-based media optimization

technology managing more than $350 million in paid search annually. For

its Q2 report, SearchIgnite analyzed 2008 year-to-date paid search

activity across Google and Yahoo! to gauge the cost impact of the two

parties proposed partnership on marketers and

the broader industry.

According to the plan proposed by Yahoo! and Google, Yahoo! plans to

selectively choose advertising from Google for select keywords and

advertising positions. The analysis by SearchIgnite compares the cost

per click (CPC) of running the same keyword for the same advertiser in

the same position on the page (rank)

across both Google and Yahoo! in order to estimate the potential pricing

impact.

Key findings include:

  • Keyword prices on Yahoo! may increase by an average of 22%, assuming

    Yahoo! pursues a profit maximization strategy.

  • While average keyword pricing on Yahoo! will increase, projecting the

    actual increased cost for a given marketer is highly dependent on the

    proportion of spending across the three different types of keywords

    analyzed (see below for detailed explanation) and the ad ranking on

    the results page (e.g. first position vs. fifth position).

  • Tail terms, defined as words or phrases that are very specific and do

    not see high search frequency, are priced at a premium per click on

    Google for all positions, with an almost 20% gap by position #3 and

    35% gap after position #5. While these terms do not see the search

    frequency of more common keywords, taken in aggregate, they can

    account for a significant portion of a marketers

    clicks and revenue driven from search.

  • Head terms, defined as commonly searched keywords, are priced at a

    premium per click on Yahoo! on average for the first three positions.

    After position #3, head term advertising on Google becomes more

    expensive on average. Bidding on these keywords is generally more

    expensive due to their large volume of searches and high competition

    among advertisers.

  • Brand terms, defined as keywords that include marketers’ own brand or

    product name, are consistently priced higher per click on average for

    the first position on Yahoo! than on Google, with positions #2 and #3

    collectively priced roughly the same between the engines.

Understanding these keyword price variations can help marketers better

adapt to the expected price increases as a result of the partnership.

The deal is clearly financially beneficial

for both Yahoo! and Google; however, advertisers need to be aware of the

potentially significant impact to their search marketing efforts,

said Roger Barnette, President of SearchIgnite. Most

marketers will see their overall costs for search advertising across the

Yahoo! network increase, and will need to adjust their search strategies

accordingly.

This report is the latest in a series of quarterly reports released by

SearchIgnite that tracks results across the engines. Previous reports

can be found at: http://www.searchignite.com/about_research.aspx.

About SearchIgnite

SearchIgnite is a powerful search management and auction based

optimization technology that simplifies large cross-engine search

campaigns, providing marketers and advertising agencies with one central

platform for managing, optimizing and tracking complex keyword

portfolios in real time. Marketers who use SearchIgnite have full

transparency and control over their campaigns with flexible bid

management capabilities including manual bidding, rules-based bidding

and portfolio optimization. Leading marketers and agencies depend on

SearchIgnite to simplify and maximize the performance of their paid

search campaigns. SearchIgnite is part of Innovation

Interactive, a digital marketing services company. For more

information, please visit http://www.searchignite.com/.

SearchIgnite
Amanda Bird, 212-991-4346
abird@innovationinteractive.com

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