Mailbag: Yahoo Sponsored Search

Pay-per-click advertising on search engines can deliver a lot of visitors to your e-commerce site, very quickly. If you sell left-handed widgets, you can buy an ad that will appear on a search engine's results pages whenever someone performs a search for the words "left-handed widgets."

People who search for information about widgets may be good prospects for your widget business. If they click on your ad, they will be sent to your Web site.

Yet it's not always easy to understand how to get the most value from your PPC ad dollar. This week I answer reader questions about how to make the most of PPC advertising on Yahoo Sponsored Search.

How Does Ad Bidding Work?

I read your January column about Yahoo Sponsored Search. I'm an advertiser, and I'm still struggling to understand how bidding works. Yahoo's online help and telephone support were of little value.

If my keyword is "widgets," am I bidding against every other advertiser who bids for that keyword? Or does Yahoo consider only a sample of advertisers each time "widgets" is searched? My bid is relatively low, 35 cents, so I'm surprised my bid ever wins. Surely there must be advertisers bidding more than 35 cents.

I sometimes see dramatic changes from day to day in the number of ad impressions and, of course, clicks on my ad. For example, I had 4000 impressions on May 9 and only 1500 on May 10. I do not understand why there would be such a large variation, especially when the preceding four days had relatively consistent numbers.

Any info you can share would be greatly appreciated.
--Brian Jaffe, New York

I put Brian's questions to Gaude Lydia Paez, director of public relations at Yahoo.

Top-Ranked Ads Don't Get All the Clicks

Before Yahoo introduced the new keyword-bidding system that I described in my January column, the highest position in the ad results always went to the advertiser that submitted the highest bid for the keyword that was searched.

In the new system, an ad's ranking is determined by a mix of bid and ad quality. Yahoo's Ad Quality Index is based on a number of factors, such as historical performance (click-through rate) and the performance of competitors. Other factors include whether the keyword appears in the title or text of the ad or in the URL and text of the Web page that the ad links to. This new system makes it more difficult for you, as an advertiser, to predict your ad rank in advance.

Paez explains:

<blockquote>Advertisers should not think of their rank as winning or losing. The amount of the bid amount and the quality of the ad determine how prominently an ad will appear on a results page. A 35-cent bid may or may not be sufficient to be listed at the top of the page. An advertiser would have to submit a higher bid in order for an ad with a low quality index to appear higher up than an ad with a higher quality index. Also, every ad receives clicks. A fourth-ranked ad still gets its share of clicks.</blockquote>

<blockquote>Most Yahoo Search results pages will display several ads. For example, the first page for one competitive keyword that I track displays 14 ads. The second and subsequent results pages show even more, lower-ranked ads.</blockquote>

<blockquote>So someone searching on your keyword may see your ad even if it doesn't garner the top slot. And every time your ad is displayed, it's available for a visitor to click and then visit your site. Sometimes your lower-ranked ad may appear more relevant to the searcher than one displayed at the top of the page. Lower-ranked ads will still receive some clicks, though they likely won't receive as many as the top-ranked ads.</blockquote>

<blockquote>If you have a limited PPC advertising budget, you may receive more ad clicks for your dollar by setting a lower bid amount. Find out by testing different bid amounts and tracking your results.</blockquote>

Many Factors Determine Ad Impressions

Regarding the highly variable number of ad impressions, Paez says:

<blockquote>There are many reasons this can occur. Search volume can be sensitive to seasonality, day-of-the-week, current events and other factors. Click volume is also sensitive to the number of advertisers who participate on a given day. For example, an advertiser may have excess inventory [of the merchandise they are selling] at the end of the month and may then want to achieve higher ad placement to promote sales of overstocked merchandise. This could lead to an increase in advertising budget and bids which could potentially affect the volume of clicks you see from one day to the next.</blockquote>

<blockquote>In other words, if other advertisers increase their budgets or bids on the same keywords as yours, your ad may drop in rank and be displayed on the second page of results instead of the first page. There it will be seen by fewer people, and thus receive fewer impressions, than ads displayed on the first page.</blockquote>

<blockquote>Some keywords are highly sensitive to events. For example, media reports about a new HP printer could cause a surge in impressions for related keywords over several days as more people search for information about the new product.</blockquote>

<blockquote>Some business-related keywords that I track typically have far fewer displays on non-business days, weekends and holidays, than on Monday through Friday.</blockquote>

Are Minimum Ad Bids Too High?

Another question about the Yahoo Search column appeared on a PC World forum:

Do you have any thoughts about Yahoo's minimum bid of 10 cents per ad click, compared to Google AdWords' 1 cent and Microsoft AdCenter's 5 cents? Many keywords can't provide an acceptable ROI [Return on Investment] at 10 cents per click.

The minimum bids typically become a factor only when you are bidding on marginal keywords. These keywords may not be very effective for delivering potential buyers to your site. Some of these keywords may have very low daily search volumes.

These marginal keywords can still form an effective component of an overall PPC ad campaign. Unfortunately, they are often overlooked by advertisers who bid high amounts for the most popular terms and ignore a vast number of unpopular yet relatively inexpensive keywords.

I discussed Google AdWords in my July 2006 column. One AdWords campaign that I manage has bids on 1255 keywords. The average keyword cost per click ranges from 2 cents to $1.57, with an overall average of 46 cents. The top ten most popular keywords represent less than 1 percent of the total keywords, yet they account for a disproportionately large share of one in every four clicks.

The remaining 1245 relatively unpopular keywords, which make up the bottom 99 percent in popularity, bring in 75 percent of the clicks. The unpopular terms have an average cost per click that's 17 percent lower than the top-performing terms.

So I believe you need both popular and unpopular keywords in a well-rounded PPC advertising campaign. The popular keywords will bring your site a large number of visitors. The unpopular keywords will lower your average cost per click.

If Yahoo's 10-cent minimum bid is too high to justify your ads, spend your ad dollars with Google or Microsoft. Presumably Yahoo must believe it isn't losing too much ad revenue by discouraging bidding on these marginal keywords.

Richard Morochove is an IT consultant and writer. Send him questions about using technology in your small to mid-sized business via e-mail. PC World may edit your query and cannot guarantee that all questions will be answered.
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