In issue #48, SMTrends introduced the new Yahoo! quality-based pricing structure that is being incorporated into its cost-per-click offerings in the search and contextual network.  Although the majority of pricing adjustments will effect contextual click-throughs, this system will also apply to some partners in Yahoo!’s search network. This week, Michelle Kelly from Atlanta concludes her initial thoughts and analysis of the system.

Some have expressed concerns over the possibility of Yahoo! using conversion data (being analyzed as a part of the pricing determination) not just to decrease costs for lower-converting sites in the network, but also to increase costs for those who perform well.  Yahoo! states in its FAQ:  “…we are not increasing the amount you pay for traffic from high-quality sites (like Yahoo.com), and you will never pay more than your maximum bid amount. Quality-based pricing applies a discount at the time of the click only.”

Any new algorithm, especially one related to search, can expect fine-tuning on a fairly regular basis shortly after the initial launch. Some have also had concerns in the past over Panama’s relevancy model, which is obviously one of the most important technologies tied into this pricing system, and needs to be strong. If not, a site within the Yahoo! network could be showing irrelevant ads.  AA|RF has seen no evidence to support this possibility, but it is the kind of thing to keep in mind whenever there is a change of this magnitude.  The bottom line is that quality-based pricing will decrease overall spend for advertisers on poorly performing sites, which should increase ROI. 

There are no necessary changes to bidding strategy as a result of this pricing structure change. For Paid Search managers, it is also nice to know that discounts received through quality-based pricing will be factored into the forecasts of costs and budget estimates provided by Yahoo!. When going through the campaign creation process in the new Sponsored Search, the budget estimates and forecasting tool will include the impact of quality-based pricing so that you can have confidence in setting your budgets as changes roll out.

While the introduction of quality-based pricing is a big win for advertisers, publishers may not be as enthusiastic. Although the good news is that price based on performance is catching on quickly, and the trend should continue across not only Yahoo!, but across the industry as a whole. Fingers crossed!  One thing is for sure, AA|RF Paid Search teams will be closely monitoring the impact of this new pricing model and will pass along any updates or new information to clients and SMTrends as it becomes available.

Vertical Search is still in its infancy, but with early successes in shopping and travel, companies operating in other verticals are looking to get into the game as well. The promise of vertical search is increased levels of personalization along with more relevant results. Given the targeting challenges and dollars associated with healthcare marketing today, it is no surprise that several health-specific search engines have spawned within the past year. SearchMedica (also in the UK) is an interesting play on the hotly contended direct-to-physician front. On the direct-to-consumer side, the past year saw the launch of Healthline and Healia. All of these sites launched with relatively low traffic levels, but that is beginning to change.  Healia was introduced in SMTrends Issue #11.

Healthline is up to six million monthly unique visitors and 26 million monthly page views, according to ComScore. In addition, they’ve partnered with big name publishers such as The Health Central Network in order to allow each site in the network to customize search results to match the look and feel of that site. Search results will come from HealthWeb, which provides prescreened results from more than 200,000 consumer health websites. Searchers will also be able to use the new tools to broaden or narrow their search, or find related topics. Healthline has strayed from the standard bid-based text link auction model and has concentrated on display opportunities to date.

More recently, Healia was acquired by Meredith Corporation, publisher of well known magazines and online counterparts Better Homes and Gardens, Ladies Home Journal, Family Circle, and American Baby. Healia presents consumers with a number of personalization filters for narrowing search results by gender, age, and racial/ethnic group, as well as contextual filters for consumers to focus their search for prevention, causes/risks, symptoms, diagnosis/tests, treatment or side effects. While traffic has been minimal to date, distribution across the Meredith properties, reaching 75 million users per month, is sure to bolster that. Healia’s ad model is still evolving; however, Meredith brings great experience in page view monetization to the table, and is sure to bolster growth of the model along with adding tremendous scale.

Smart healthcare marketers will be considering these two options as they plan for 2008.

Google/eBay Saga Continues – As reported in issue #49, eBay had some issues with Google planning a party to promote its Google Checkout services in Boston during the same week as a big Google conference.  For those not interested in soap-opera type stories, please move along.  Otherwise, read the latest amazing chapter to that story at Search Engine Land.  Oh, and eBay has returned to the Google marketplace with their sponsored listings, as reported at the Times Online.

Rumored Yahoo! and News Corp Deal for MySpace – There is a rumor that News Corp is considering exchanging MySpace for 25-30% of Yahoo!.  This is an amazing price considering News Corp paid just less that $600 Million for MySpace, which one would think is hardly the value of one third of Yahoo!.  Techmeme, as usual, provides a great list of people discussing the topic.