• Find Resolution , Wednesday, June 18, 2008 12:45 PM

Much of the discussion around the pros and cons of the proposed Yahoo-Google search deal centers on whether (or how much) it will affect bid prices. While there's no doubt that it will likely increase demand (and pricing) for advertisers using AdWords, many are on the fence about whether it sends prices up or down on Yahoo.

Aaron Goldman lays out those scenarios, arguing first, that prices could go down on Yahoo if smaller advertisers in particular shift their focus (and their demand) over to Google, and just hope to catch some wayward Yahoo traffic.

On the other hand, prices could go up on Yahoo, "as advertisers attempt to capture more volume knowing that Yahoo will prioritize ads that pay out higher than Google syndication," Goldman says. "In other words, since Yahoo has to share revenue for each click generated via Google, if bid price and click-thru-rates (CTR) are equal for a particular keyword, Yahoo will show its own ad."

Goldman then goes on to offer a few examples that show how varying Quality Scores, minimum bids and advertiser goals could send the pendulum in either direction. Ultimately, Goldman says, "there is no clear answer regarding the impact of this deal on pricing." But, he does advocate maintaining campaigns on both paid search platforms for best results.

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