Study: Microsoft-Yahoo Search Alliance Opportunity; Earnings Suggest Otherwise

Microsoft and Yahoo saw paid-search share of impressions rise from 19% to 23%, and paid clicks rise to from 19% to 21% in the first few months after the alliance went into effect, according to a report published by Marin Software Wednesday. The report, "Why the Search Alliance Is Paying Off for Paid Search," might make some marketers wonder.

Analyzing numbers from Yahoo's reported earnings a day earlier, marketers would not have suspected. On Tuesday, the Sunnyvale, Calif. company admitted it would lay off 1% of its workforce, following 4% in December.

Yahoo's reported fourth-quarter results highlight problems in search, according to Wedbush Analyst Lou Kerner. He writes in a research note that "guidance was 2% below our forecast, adjusted for lower-performing search."

Ben Schachter, analyst at Macquarie Securities, also remains concerned about Yahoo's search share. Core search for the quarter fell about 6%, he writes in a report.

Marin's analysis from their search study suggests the Microsoft and Yahoo search alliance increasingly should become an attractive option for enterprise search marketers. During the period of the study, the combined companies increased the share of paid-search impressions by 4% and share of clicks by 2%, while Google's share declined by the same percentage.

Matt Lawson, Marin's marketing vice president, sees the drop in Google's ad share as an opportunity for marketers to take advantage of Bing and Yahoo. "We know Bing can potentially close the gap, as advertisers come on or rejoin the new platform," he says.

Bing faces challenges to keep up user query share. The transition did make it easier for advertisers because adCenter works in a similar way to Google AdWords, compared with Yahoo's search platform. Advertisers, however, cannot port their campaign without making slight differences with geotargeting and ad copy.

The Bing-Yahoo alliance demonstrates better conversion rates and cost per clicks, Lawson says. The search alliance has resulted in improved traffic quality for advertisers. Higher conversion rates demonstrate improvements. Excluding the impact of seasonality, conversion rates rose by 12% during the study period. The results show that consumers respond to the combined platform.

The study also found that the amount marketers spent on Google rose 60%, whereas spend on a combined Yahoo and Bing increased by 44%. Findings suggest that not only did Google gain share of spend during this period, but increased advertising revenue at a faster rate as the overall pie expanded. It also suggests that the rationale for this dynamic is that some advertisers may have migrated ad spend from Yahoo to Google in advance of the transition.

While CTR and CPC are important markers, the study looked at post-click conversions and was also intended to assess traffic quality. Gauging conversions by indexing Yahoo's and Bing's conversion rate and CPA at their August values, Marin measured how these indicators changed relative to Google during the four months. As expected, conversion rates dipped, but then picked up again and ended the year 13% higher than their starting point. Yahoo-Bing CPAs rose during the transition, but then ended the year 17% below its August value.

The data suggests that conversion rates on the search alliance became more favorable following the transition. Marin attributes this to several factors including higher-quality traffic, better targeting options and a more efficient marketplace.

Marin's study, run between Aug. 15 and Dec. 15, 2010, analyzes data from more than 800 of its clients that collectively manage more than $1.8 billion in annual paid-search spend.

2 comments about "Study: Microsoft-Yahoo Search Alliance Opportunity; Earnings Suggest Otherwise".
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  1. Dan Kost from Sportrons, January 27, 2011 at 6:01 p.m.

    I can tell you one of the reasons, right before Yahoo turned over the account to Microsoft, they debited our advertising account and doubled the amount of funds in our advertising account. There was no authorization for this action. The account had plenty of funds to last 30-45 days based on our advertising spending history. It just seen to me that Yahoo wanted to pad the customer accounts before the transfer.

  2. Michael Martinez from SEO Theory, January 28, 2011 at 3:24 p.m.

    Everyone I have spoken to who manages PPC campaigns tells me the same thing: the cost of acquiring traffic from the Microsoft-Yahoo! network has increased significantly since the merger.

    The only marketers who want this nonsense to continue are those who charge fees based on PPC costs to manage client campaigns.

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