Introduction
On the evening of February 5th, Yahoo! rolled out the last piece of their long anticipated Panama search ad serving platform. The final update to Panama retired, once and for all, Yahoo!’s bid-per-position model in the Paid Search landscape, replacing it with the relevancy-focused ad model pioneered by Google. This update was expected to have major implications on the dynamics of the Yahoo! Search Marketing landscape, particularly in terms of keyword click costs and click rates.
Detailed below are Panama-related data points accumulated across 33 current Avenue A | Razorfish search clients. These data reflect changes in search volume, click rate, cost per click (CPC), and conversion rate for the 10 days prior to, and 10 days post, Panama launch. While data vary widely across clients, the general trends are useful in guiding strategies in the post-Panama marketplace.
Data Highlights
Post-Panama campaign dynamics varied widely across the 33 advertisers analyzed. Overall, however, the following broad trends were observed:
- Search Impressions – Up an average of 5%
- Cost Per Click – Down an average of 6%
- Click Rate – Up an average of 10%
- Conversion Rates – Down an average of 5%
- Overall CPA – Up an average of 6%
Search Impressions
Impressions were up an average of 5% across clients. For clients who saw an increase in impressions, the average increase was 35%. For clients who saw a decrease, the average decrease was 18%.
Increased impression volume post-Panama was expected due to two factors: Increased broad-matching by Yahoo! exposed Paid Search ads to an untapped segment of keywords; and more efficient budgeting by Avenue A | Razorfish freed up funds for reinvestment elsewhere. Specifically, reduced CPCs on branded terms cut costs in this category, freeing up funds to support other keyword categories more fully.
Cost Per Click
Cost-per-click post Panama was down an average of 6% across the thirty-three clients analyzed. This analysis did not break out cost per click on branded and unbranded terms, but initial data show steeper CPC declines among branded keywords – down in many cases 10%-30%. CPCs on non-branded keywords are steady, and in some cases have risen. Search Account Managers, too, have noticed increased aggressiveness in the bid landscape since Panama launched in early February. While CPCs are down overall, we expect continued volatility in the CPC landscape over the next several months as advertisers adapt to Yahoo!’s new model.
Click Rate
Overall, the 33 advertisers examined experienced an average increase in click rate of 10%. Again, results varied widely across advertisers. Of those advertisers experiencing a click rate increase, the average increase was 28% (ignoring outliers). Those advertisers experiencing a click rate decrease saw click rates fall, on average, 18%.
Increased click rates are the most expected outcome of Panama, given Yahoo!’s incorporation of click rate as a factor in search ad position. Additionally, new features in Panama enable A/B copy testing, further enhancing advertisers’ ability to optimize click rates.
Recent data from ComScore supports our finding of click rate improvements post Panama. It should be noted that Yahoo!’s ability to increase click rates while also increasing their volume of search impressions is a testament to the effectiveness of their new relevancy-based Paid Search model.
Conversion Rates
As with other metrics, changes in conversion rates varied widely across clients. Overall, conversion rates were down slightly, dropping on average 5% post Panama. Roughly 2/3 of clients saw declines in conversion rates, while 1/3 saw conversion rates increase. Changes were dramatic on a client-by-client basis. At least six clients saw conversion rates drop by 20% or more, while four clients saw conversion rates increase by 25% or more.
Overall Efficiency
Thus far, overall efficiency post Panama is slightly reduced, with a 6% increase in cost per acquisition across this set of advertisers. Like other metrics, cost per acquisition varied widely across advertisers. On the extremes, one advertiser reported CPAs more than double that of their post-Panama performance. Another advertiser realized a 26% reduction in CPA and 15% greater acquisition volume.
Efficiency will likely vary over the next several months. Key drivers of this variance include:
- Active optimization by Avenue A | Razorfish search teams
- Volatility in the search landscape due to advertisers’ testing boundaries in the new system
- Volatility in the search landscape due to Yahoo! modifying their quality score algorithm
Conclusions
Based on preliminary data, advertisers should expect to see higher overall click rates on Yahoo!, and slightly lower CPCs (especially those advertisers with strong branded search term volume). The wide variance in data across clients, and the ongoing volatility in the search landscape, makes it difficult to draw firm conclusions. In short, the jury is still out on Yahoo! Panama. Avenue A | Razorfish will continue to monitor the post-Panama Yahoo! search landscape closely, and keep clients informed or new developments and insights.