Yahoo LogoYahoo has suffered through its fair share of turmoil over the last few years: a revolving door of CEOs, significant layoffs, investor revolts, and a declining share of the search space, both paid and organic.

One recent bright spot for Yahoo was their first year over year growth in search revenues after traffic acquisition costs (ex-TAC)  since their alliance with Microsoft in the fourth quarter of 2010. In fact, before last quarter, Yahoo hadn’t shown Y/Y growth in search revenue ex-TAC since they began reporting it in 2009.

Not too shabby then, and Yahoo’s results were generally well received by the financial industry. The price of Yahoo stock jumped 3% immediately after their Q1 earnings announcement, and it has remained elevated through mid-June even as Google stock and the larger Nasdaq index had fallen 8% and 6% respectively.

But not all signs look positive for Yahoo, nor for advertisers looking to achieve volume increases there. While Yahoo’s search revenue was up 8% Y/Y in Q1, search pageviews fell by 8%, their largest decline since at least 2009. This suggests that Yahoo costs-per-click (CPCs) have increased, ad click-through rates have increased, or some combination of the two.

Yahoo doesn’t break out those metrics, but on their earnings call, CFO Timothy Morse offered that click-through rate growth outpaced CPC growth, but both contributed to their revenue gains. This fits with RKG’s take on Q1 stats, which found Microsoft adCenter-powered ads across Bing and Yahoo delivering 11% higher CPCs and a 29% higher CTR.  But, due to a substantial decline in impressions, we saw click volumes fall 4%.

Things start to get interesting when we dig into what’s really behind all of these figures.

Why Your adCenter CPCs Are Rising

One of the biggest issues Yahoo should have foreseen with the Search Alliance was that Microsoft’s ad serving logic in adCenter was far more restrictive than Yahoo’s own system was at the time, as well as Google’s AdWords.

When RKG looked at this last year, we found adCenter was broad matching our ads to queries just 40% of the time for Yahoo, compared to Yahoo’s 60% broad match rate prior to the Alliance. This surely contributed to Yahoo’s paid click declines since late 2010.

In August 2011, announcing changes to their matching behavior, the adCenter blog advised advertisers to be “prepared to take on additional traffic.” Well, we didn’t see the types of changes we were hoping for, namely, additional quality non-brand traffic. Instead, what we noticed was a dramatic increase in broad matching for our clients’ own brand, or trademark, terms. This trend only continued into 2012.

By the beginning of Q2 2012, adCenter was broad matching brand terms at nearly twice the rate that Google was doing the same. The two engines had been at parity in this respect in mid-2011. This has led to much higher brand CPCs on Yahoo and Bing in two ways:

  1. Competitor ads are being matched to our clients’ brand terms at greater rates, driving up our CPCs for auctions that were previously far less competitive.
  2. Our own brand ads are being broad matched to the brand phrases of others, as well as more competitive non-branded auctions, at greater rates.

The wheels were set in motion for this in March of 2011 when adCenter loosened its trademark policies to bring them into alignment with Google’s. As adCenter’s broad matching on brand has nearly doubled, so too have their CPCs, even as Google brand CPCs have steadily declined.

While we have little control over the first behavior above, there are some tactics we can employ to alleviate the impact. On the second point, there’s a great deal we can do and it’s just a matter of due diligence for a segment that is often too easy to overlook because of its relatively strong performance.

Tips To Keep CPCs For Your Brand Terms In Check

1.  Watch your brand bids

Or better yet, watch your bidding logic. While it may sound simple, you can’t pay more than you bid, and you may be paying far more than necessary to maintain visibility on your brand terms. At a basic level, paid search bidding systems seek to maximize a conversion metric given a certain efficiency constraint.

If your efficiency constraint is, say, a simple sales to cost ratio that applies to all keywords in your program, you’re likely to end up with very high bids on your brand terms, due to their great ability to convert.

This leaves you at risk of actually having to pay those high bids, or close to them, if the engines find clever ways of making you. This could include the engines increasing broad matching for queries with the highest bids, employing top of page thresholds that act as artificial competitors and so on. The bottom line is we can’t assume that if we are in position 1, our bid doesn’t matter because of the supposed nearest-competitor-plus-a-penny auction mechanics. It certainly does on Google.

Simply put, just because we can afford a certain bid in aggregate, based on an overall efficiency target, doesn’t mean we should or need pay it. Instead, advertisers should be considering the marginal impacts of raising and lowering their bids and even the extent to which paid listings cannibalize organic traffic.

Because brand terms are fundamentally different from the rest of your paid search program, one approach to get at this question is to simply test applying a much stricter efficiency target for your brand segment. This will likely lower the CPCs you’re paying, without having much impact on the traffic you receive from queries on your brand.

2.  Be vigilant with negative keywords and match types

If we’re finding our brand terms being broad matched to distantly related queries, we might get upset with the search engines, but ultimately we only have ourselves to blame.

Researching negative keywords should be a routine part of any paid search program and, once again, we can’t overlook the brand segment just because it performs more efficiently than the program as a whole.

When negatives aren’t enough to stem the traffic from poorly matched queries, we may want to adopt or limit our keywords to more restrictive match types. At RKG, we generally choose to run individual keywords on multiple match types with bids appropriately set for each, based on expected performance differences.

Limiting a keyword to only exact match is the nuclear option, but sometimes it’s necessary. In most cases though, retaining phrase, exact and utilizing broad match modifiers will do the trick when normal broad match proves untenable.

3.  Properly funnel traffic to the appropriate keywords

The truth is, even very broadly matched traffic, whether it is from a generic phrase or even a competitor’s trademark, can provide a great deal of value to us. But just because it is valuable doesn’t mean the situation is ideal. We would much prefer to have a keyword that matches the query more closely, so we can better target our copy, choose our landing page, and set our bids.

Even small differences between a query and keyword are predictive of a lower revenue per click than an exact match, and that gap only grows as the match gets more broad. When the same keyword triggers for very close queries and very broad queries, its overall performance stats get diluted and we end up with a bid that is too low for some of its clicks and too high for others.

As with adding negatives, we should routinely be scouring our search query logs to look for valuable keywords to add to our accounts. There isn’t a guarantee that adding a new keyword will prevent an existing one from showing for that query, but it should help in conjunction with the judicious use of negatives and match types mentioned above.

Progress On Non-Brand?

To close on a positive note, we are seeing signs that the adCenter engineers are making progress at expanding broad matching for non-brand terms, while, importantly, preserving click quality.

This is the segment where there is an opportunity for Bing and Yahoo to deliver real incremental value to advertisers, while improving their own fortunes at the same time. And, although we should strive to have robust and extensive term lists, broad match will always serve an important role in paid search.

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

Related Topics: Advanced | Channel: SEM | Enterprise SEM | How To | How To: PPC | Microsoft: Bing Ads | Search Marketing: Branding | Yahoo

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About The Author: is the Senior Research Analyst at the Rimm-Kaufman Group (RKG). He manages and writes for the popular RKG Blog and heads the production of RKG's quarterly Digital Marketing Report, which covers PPC, SEO, Attribution, Social Media and more. Follow him on @mp_ballard.

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



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