Bing And Yahoo CPCs: The Inevitable Vs. The Incredible

by Roger Barnette, Oct 1, 2010, 11:33 AM

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Much has been said recently about the Bing and Yahoo search alliance and its effect on cost-per-clicks (CPCs) for the search marketer. For this reason I would like to make a few points on the "inevitable" vs. the "incredible." Most search marketers would agree that CPCs will rise as people make the transition.  However, what some people find incredible is the estimates that some surveys predict with regard to the rate of which CPCs will rise. 

Inevitable 

Across our client set, Bing has less than half the volume of Yahoo, and Bing's CPC is 9% less than Yahoo.  All things being equal, in an efficient marketplace, over a short period of time, CPCs should rise slightly for Bing and drop slightly for Yahoo.  But all things are not equal -- especially during an uncertain time of combining platforms during the busiest quarter of the year for most marketers.   

As advertisers adjust to move accounts from Yahoo to Adcenter, most will take a conservative approach and will keep the same bidding strategies wherever possible, pay very close attention to the results, and adjust their bids appropriately.  There will likely be more marketers who would prefer to overbid and adjust their bids down as they gather data than take the opposite strategy and risk losing market share in a very important time of the year.  This might cause a brief and unsustainable increase in CPCs across the combined network, but paid search marketing has near-instantaneous feedback on performance, so I would not expect this to last long.  In immediate weeks following the launch of the search alliance, expect CPCs to fluctuate significantly before they begin to reach equilibrium.

Incredible

A recent GroupM study has revealed a projected increase of 78% above current Bing CPCs. That would be great news for the Bing and Yahoo search alliance.  While there is "inevitably" going to be a number of Yahoo-only advertisers moving to adCenter bidders, only 11% of SearchIgnite spend comes from clients who do not have both accounts already.  This is a far cry from the 74% increase projection from the recent GroupM study. 

Other reasons that CPCs could increase include the increased efficiency of the Adcenter optimization engine and marketers giving more attention to Yahoo/Bing by marketers on the non-bid aspects of campaign management such as creative, keywords, landing pages, negatives, etc. 

Tips for the Search Marketer  

What I believe marketers should watch very closely is click-through rates.  One area where we have seen improvement during initial testing of the search alliance is in click-through rates on Bing.  If Bing is able to increase click-through rates on the combined platform, then, even if CPCs are flat, the overall spend on Bing/Yahoo will increase.  Marketers should make sure they take advantage of this potential opportunity and be ready to adjust their media mix appropriately. 

 If CPCs do fluctuate, make sure you budget and manage accordingly. Understanding when this happens will allow you to increase or shift spend as needed.  Go back to basics and look at management of match types and negatives, structure your ad groups to improve quality scores, test creative and maximize conversion. Make sure you reread the adCenter blog and its five recommendations for the mid-October ad-serving transition

·       Increase your monthly spend to at least one-third of your overall SEM budget (U.S. only).

·       Adjust your bids for more advertiser competition.

·       Set keyword bids by match type.

·       Expand your keyword list.

·       Continue managing your Yahoo Search Marketing account.

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