Yahoo to eliminate 10 cent minimum keyword bid

Yahoo Search Marketing has announced that it will eliminate its 10 cent minimum keyword bid for text-based ads in the United States. The change is set to go into effect this week, according to a Yahoo spokesman.

The pricing change “is simply the next step in Yahoo’s ultimate goal of offering the most efficient pricing for high quality advertisers and continually improving the ad quality for our end users,” said Kristen Wareham, director of corporate communications for Yahoo, when reached by e-mail.

The change was first announced in a Yahoo blog post in February. Depending on ad quality and value, among other factors, some minimum bids may be lower or higher than 10 cents, Yahoo said.

“In general, the enhancements we have been introducing since early 2007 should collectively help reduce cost-per-click charges when the quality of ads is higher, or when we discount clicks from certain partners’ sites,” Wareham said.

The change has left some search marketers concerned. “This is a move to emulate what Google is doing, but Yahoo doesn’t have many of the same safeguards in place that Google does,” said Jeremy Hull, account leader for Range Online Media, in response to the change. For example, Yahoo’s restrictions on using trademarks in ad creative are much “more lax” than Google’s so many larger advertisers may see more competition for their trademark terms, Hull said.

Another concern is that Yahoo’s Panama search advertising platform is just more than a year old. Adding another layer of complexity may compound any issues that people are currently having with it, Hull said. “I know advertisers in general would be more receptive to just basic improvements in the general Panama system,” he added.

Overall, Hull anticipated that the low to mid level advertisers will be hit the hardest by the change, while bigger advertisers will have the budgets to ride out any fluctuations.

“It will affect some advertisers positively and some negatively, depending on category and competition,” said Chrysi Philalithes, launch managing director of Steak Media NY, via e-mail. Ultimately it will depend on an advertiser’s cost per action, she said.

If minimum bids drop below 10 cents for certain keywords, new, smaller advertisers may jump into the auction. In the long run, this could stimulate competition and therefore increasing cost per clicks, Philalithes said. “This was an effect that was commonly seen when Google introduced their own minimum bid requirements,” she continued.

In the end, the change may turn out to be beneficial, Hull added. “Everyone’s hoping for the best, but expecting the worst scenario,” he said.

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