What Yahoo’s New Minimum Bid Means To You

Yahoo recently announced that they are moving away from a $0.10 fixed minimum CPC to a variable minimum bid. However, there are some differences in how Yahoo calculates minimum bids compared to AdWords. These differences are important to note as you switch between these PPC engines so that each account is properly optimized for each engine according to how the bids are calculated.

Yahoo’s New Minimum Bid Factors

Yahoo uses two main factors for determining minimum bids:

  • value of the keyword
  • quality

The value of the keyword factor will frustrate many marketers. This value is calculated by many indicators, including the number of advertisers and those advertisers’ bids. This means that for keywords with high competition, the keywords can have higher minimum bids. If there are a few bidders, but they are bidding high amounts, the minimum bids can also be different.

The second factor is one that we’re much more use to in the PPC industry: quality.

In this case, Yahoo is defining quality as a measure of relevance an ad has to the search results. One of the two main factors that Yahoo uses to determine relevance is the ad’s historical performance. This is calculated by examining the click through rate compared to competitors and normalized for position. The second factor is the ad’s expected performance which is solely determined by a Yahoo algorithm that seeks to predict performance.

Minimum bids only apply to the search network. The content network still maintains a $0.10 minimum bid.

Interpretation of Keyword Value

The value of a keyword factor is a significant move for the PPC industry, and a bit of a risk. While a value based factor has existed in product feeds for a few years, it has not been tested in the more adopted search advertising environment. I doubt Yahoo will push this factor as hard as possible out of the gate until they look into how it’s affecting advertisers and costs.

Yahoo has a product called Product Submit, which includes items in Yahoo Shopping. Each category has a minimum CPC based upon what Yahoo believes is the value of that category. When Yahoo Shopping was announced in 2003, it was widely speculated that Yahoo would use that data to increase minimum bids on PPC based upon both the keyword’s category and the perceived value of a keyword. It appears that day has arrived. This could get very interesting for industries that share keywords with drastic differences in the value of individual sales.

From Yahoo’s perspective (this is my speculation, not Yahoo’s statements), I can see the boardroom conversation taking place about how to raise revenue, and where Yahoo is leaving money on the table. If marketers were paying less than their perceived value of a click, the difference between the value and the actual cost was money Yahoo was not collecting. Therefore, if Yahoo moved to a minimum price based upon value, it would do two things. The first would be to have less data to process. The marketers who weren’t in the auction didn’t need their data crunched as searches were conducted, which means less processing power. The second, and much more obvious reason, is that it would increase revenue. Knowing several people at Yahoo, I doubt the outcome was quite so nefarious sounding, and there was a mention that the quality of the traffic would not change for advertisers, nor the value of a click, only the actual costs.

However, I’ve already seen tightly themed, high value (in this instance, real estate) ad groups where minimum bid prices ranged from $0.10 to $4.07 for different keywords in the same ad group. When the current bids were in the $0.50 range for position 5 and the ad group had a 4 quality index, a $4 plus bid seems quite steep. The only way to explain this is based upon perceived value. The quality of the ad group is there, but real estate often carries a hefty price tag, even in today’s market.

 How Yahoo’s Minimum Bid is Different from Google’s

First, a quick recap on how Google calculates minimum bids:

  • Click through rate on Google.com
    • Overall history
    • Most recent history
  • Ad copy
  • Landing page
  • Account quality score
  • Landing page load time
  • Other relevancy factors (such as geographic targeting)

What Google does not use is other advertiser bids, number of advertisers, and keyword value. On Google, you can lower minimum bids by optimizing your landing pages, keywords, ad copy, and account organization, regardless of what someone else is doing.

On Yahoo, there are still best practices to be had, such as proper account structure and ad copy testing; however, there is a cap to how much you can lower the bid yourself because of the competition or value of a keyword.

On Google, a minimum bid under $0.10 means you are doing something right. The higher the minimum bid, the more you need to work in optimizing a keyword.

On Yahoo, the most you can try to optimize for is a high quality index for your ad groups and ad copy. It is important to note that Yahoo’s quality index is relative to the competition. This is more visibility than Google gives you about your campaign in relation to competitors.

For AdWords, minimum bids are optimized according to your account performance. On Yahoo, you are optimizing minimum bids according to your competitor’s performance.

Yahoo has not changed the minimum bid for content match — it is still $0.10. However, you can bid under that amount for content match, which means your ads will be inactive for the content network. On Google, if you are bidding under the minimum bid, your ad will not be shown on search networks; however, it can still be displayed on the content network.

The last difference is in the timing of keywords becoming disabled. On Google, if the minimum bid changes, your keywords are immediately inactive for search. On Yahoo, when the minimum bids change an alert appears in your dashboard warning you of a minimum bid change. You have a few days to change these bids before the keywords become inactive. In addition, Yahoo will alert you if previous disabled keywords become active due to minimum bids decreasing.

Where to Find Yahoo’s Minimum Bid Information

On the dashboard screen, pay attention to alerts for keywords being set to go active or inactive. You can also see top keywords and watched keywords, as well as content match status on the top ad groups or watched ad groups list.

When you navigate to the ad group screen under the campaigns tab, you can quickly see all ad groups and if the content match status is disabled. If you have a large campaign, use the advanced search function to only show ad groups with inactive or pending inactive statuses. These same statuses are also shown as you navigate to an individual campaign which displays the ad groups.

Within an ad group, any keywords that are inactive will be marked as such with the minimum bid listed. If you would like to see the minimum bids for active keywords, select them and go to keyword bids. On this screen the minimum bid will be shown just under where you enter the bid.

Additionally, you can go to keywords under the campaign tab and do an advanced search to only show inactive and pending inactive keywords.

However, the above makes you rely on Yahoo’s interface, which can be slow at times. If you want to see everything at once, I would suggest using the download campaign function. The downloaded spreadsheet now has some additional information. In the display column, the new inactive statuses are shown. Additionally, there is a minimum bid column. It’s easy to either view only inactive keywords or sort your minimum bids from high to low to get additional visibility into your entire account.

Optimizing Your Minimum Bid

All PPC optimization starts with proper account structure. With Yahoo this can be very important, as your ad group quality index is based upon all the keywords in your ad group. If you have a couple keywords that are of poor quality, they can adversely affect the other keywords in that ad group. Move any poorly performing keywords into a new ad group or delete them from your account.

Yahoo is a proponent of using the keyword in ad copy. They have stressed this in their blog, help files, webinars, and conferences.  There are two different ways to have your keywords displayed in your ad copy. The first is to use very small, tightly themed ad groups where all of the ads displayed match your keywords closely. The second option is to use Yahoo’s keyword insert feature to automatically add the keyword to the ad copy. Using the keyword in the ad copy will help with your quality score and minimum bid.

The other optimization technique is to make sure you have at least two ads running in each ad group at any time. Once you have a few ads running in an ad group, use the optimize ads feature to show the higher performing ad more often.

Yahoo is stressing high CTR, quality index, and using keywords in the ad copy. While optimizing for minimum bids is easier on Yahoo than Google, your results can vary based upon other advertisers. Your key indicator is paying attention to the quality index score.

Other Things To Note

Yahoo’s forecast tool recalibrates when minimum bids are updated. Yahoo asks that you wait a week after minimum bids are changed for their forecasting tool to be accurate for any keywords that had their minimum bids change.

If you are using the campaign optimizer feature and have a campaign bid limit set, if the minimum bid goes above your limit the keyword will become inactive. The campaign optimizer will also try to keep keywords active if the bids fall within the defined guidelines that you’ve set.

Conclusion

The above information concerning optimization is to have your keywords active and achieving low minimum bids. There are times, especially if you are ROI bidding, that you don’t care if a keyword has a high minimum bid. If the keyword and ad copy are creating conversions, and you are happy with the cost, you might not care about what Yahoo considers quality. It is always a marketer’s first imperative to set goals and strive towards those goals. If you have a low quality, nice returns, and are happy with the results, then you’re doing your job correctly.

Yahoo’s new minimum bids are still being adjusted. I’ve seen some dramatic changes since the minimum bid change was implemented. Some of the bids make sense, while others do not.  Yahoo has been very good in the past to listening to feedback from advertisers. If you see something strange going on in your account, point it out to them. They might not be able to fix it, but it will give them pointers towards where they need to tweak their information.

I’m still on the fence about how the minimum bids will work out in the long run due to Yahoo using a keywords perceived value to determine the minimum bid. They could easily price out small advertisers, industries where keywords overlap, and dramatically increase costs. Or, the system could remove low quality advertisers from the system who are not adding much value and make the landscape easier to manage.

Either are possible, nether is yet known. It’s a risk Yahoo is willing to take, and let’s all hope that this makes Yahoo search results more relevant while keeping the game fair for all advertisers.

Brad Geddes is the Director of Search for LocalLaunch, a blogger at eWhisper.net, and a frequent conference speaker. The Paid Search column appears Mondays at Search Engine Land.

Opinions expressed in the article are those of the guest author and not necessarily Search Engine Land.

Related Topics: Channel: SEM | Paid Search Column | Yahoo: Search Ads

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About The Author: is the Founder of Certified Knowledge, a company dedicated to PPC education & training; fficial Google AdWords Seminar Leader, and author of Advanced Google AdWords.

Connect with the author via: Email | Twitter | Google+ | LinkedIn



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