Will MicroHoo Search Alliance Increase CPCs?

GroupM-Search-Study

Bid competition on keywords drives up the cost for unbranded terms. That's a given. But a report published by GroupM Search suggests prices for branded and unbranded keywords in paid search ads may rise sharply after Yahoo and Microsoft combine Internet search advertising services. Does the uptick represent a normal progression for increasing prices or accelerated growth as the market reacts to change?

Microsoft and Yahoo announced in 2009 they would combine search services. The two have completed most of the work to serve companies in the United States and Canada.

The study from GroupM, a division of advertising conglomerate WPP, explains that for many keywords sampled, Bing's CPC prices bid higher than in Google. As the Microsoft-Yahoo search alliance goes live, common sense suggests the consolidation of the two platforms will push up competition and pricing for unbranded terms, at lease in the short term, leveling off in weeks to come. Advertises can expect an average increase of 64% above Bing's CPC prices today for unbranded keywords and 78% for branded keywords at the peak, according to GroupM. Initially, the platform merger could cause branded terms on Bing to increase by 75% on average, and unbranded by 73%. For each new competitor, CPCs for branded keyword will increase by 6.8% on average, and unbranded about 1.5%, according to the report.

Once the market place settles, GroupM expects advertisers can expect a 13% increase in CPCs for unbranded keywords and a 23% increase for branded keywords above today's prices on Bing. Andrew Goodman, SearchManager advisor to American Express Open, says the 13% uptick might be a result of delays for Microsoft and Yahoo that the industry had already experienced.

Advertisers and marketers would like to get back to what they consider "normal" Yahoo inventory. There's a lot of uncertainty around the logistics of accounts. "They're waiting impatiently" to see how the customer service and billing relationships will work, which creates a bottleneck, according to Goodman. Dormant accounts that marketers would like to wakeup don't automatically map from Yahoo to Microsoft.

The GroupM report also brings up an interesting point: Bing and Yahoo have different rules about bidding on trademarked keywords. The report explains that on Bing an advertiser must have some relevance to the trademarked term in order to bid on it, while Yahoo is less restrictive.

This leads to some keywords where there are two or three bidders in Bing and 15-25 in Yahoo. Since the Search Alliance will utilize Bing's bidding rules, the increase in competitors on trademarked terms should not exceed 200% to 300%, despite the large number of unique competitors bidding in Yahoo.

Aside from a few glitches and unique situations the two will need to work through, Microsoft and Yahoo alliance should deter advertisers and marketers from setting up campaigns. A host of platforms and applications continue to emerge assisting marketers to increase return on investment (ROI).

Adchemy on Wednesday released a platform to improve search engine marketing (SEM) conversions predicts consumer intent to customize paid-search ads and landing pages. It doesn't follow consumers around collecting information through browser cookies, but it does collect search information to build word maps.

Adchemy WordMaps automatically generates ad copy and landing pages based on templates, and keyword and query log analysis. The technology analyzes queries and breaks down keywords and query patterns into consistent terms and intents. Then it groups similar intent into topics.

Then there's Cotendo. The content delivery network (CDN) plans to accelerate search engine optimization analytics, an idea spawned by project Caffeine, Google's decision to speed up indexing on the Web. The Cotendo SEO Analytics Service, released Tuesday, offers reports for search engine crawling activity, crawler comparisons, detailed hits and errors, object delivery times, error codes, and customizable alerts.

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2 comments about "Will MicroHoo Search Alliance Increase CPCs?".
  1. Chris Nielsen from Domain Incubation , September 22, 2010 at 5:33 p.m.

    I never thought about CPC going up due to more people bidding in a smaller marketplace. When you can choose just where your ads go, this should improve, but for the time being we will see what happens and not rush in to overbid.

    I guess no one ran this by the anti-trust police...????

  2. Damon Abramson from Worldmedia Interactive , September 23, 2010 at 3:28 p.m.

    Actually, this was run by the anti-trust police, The "Justice" department, who summarily gave it the thumbs up.

    The mechanics are quite simple. Same amount of dollars chasing fewer placements - BANG! Price increases. This is no different that an inflationary spiral in an economy: More money in the money supply chasing the same amount of goods - Bang! Price increases across the entire economy (inflation).

    I'm shocked at the potential magnitude of the increases predicted here, that's all.