How Microsoft-Yahoo Merger Impacts Search Engine Marketing

by Harald Anderson
Clickbooth Director of Search Engine Marketing

Last year Google generated $18.12 billion in revenue while its chief pay per click rival Yahoo added $7.12 billion in revenue to its balance sheet. The majority of these revenues came from the popular and traditional pay per click advertising model. Much has been written about the possible merger between these conglomerates. What would a merger between these companies mean to you, the Search Engine Marketer?

Originally hailed as one of the best advertising creations ever, pay per click marketing has become the heart and soul of many traffic generation programs. Advocates contend that you are not paying for visibility as in traditional advertising but instead are targeting those interested individuals who “click” on your advertisement. The early adopters claimed that this made advertising accountable and allowed marketers to target their message and measure its response. What originally started out as a novelty in traffic generation has become an estimated $40 billion a year industry.

Microsoft, which currently has a market capitalization of $240 billion, has been a distant third place in the pay per click sector which has led many to speculate that its interest in Yahoo was primarily intended to make it more competitive with Google. As I write these words the news wires are reporting that Venture Capitalist Carl Icahn is in a proxy battle to deliver Yahoo to Microsoft. Meanwhile Yahoo is in talks with Time Warner while the US Department of Justice is doing an initial exploration and investigation about the legalities of Yahoo and Google merging. These are the “days of our clicks.”

Trust me, the pay per click soap opera is just warming up.

Throughout the intense drama and wild ups and downs of hearsay negotiations, I am all for a merger. Not because I’m a huge Yahoo, Google or Bill Gates fan, but because I believe the health of Internet is defined by the clear standards and practices of a sane search engine marketing marketplace. Currently, Search Engine Marketers have had to contend with “Google Slaps” where their keyword campaigns have been shut down by the Silicon Valley giant with no explanation provided.

PPC Marketers who have suffered the infamous Google slap compare it to Microsoft’s Blue Screen of Death in the PC arena. When Google “Slaps”, a pay per click marketer has no choice but to reboot their entire pay per click marketing campaign with no assurance of a different outcome in the future. Industry pundits debate whether a merger between Google and Yahoo would result in a “kinder and gentler” pay per click search engine.

Marketers online are interested primarily in four factors:
1) Price of a Click
2) Volume of Traffic Available per keyword
3) Number of Conversions Occurring Per Offer
4) Overall Quality of Traffic

However with all of the speculation surrounding the possibility of a merger between these companies, marketers now will have to evaluate the educational learning curves associated with understanding and mastering the distinctive delivery platforms, search marketing algorithms and placement possibilities of each company. I know that sounds like a mouthful but compare for a second how Google and Yahoo define quality as far as your pay per click marketing campaigns are concerned.

Twenty Four Months ago Google launched something they refer to as their “Quality Score” for marketers to determine the effectiveness of a keyword pay per click campaign. Google claims that a high quality score will result in lesser costs for your keyword terms. Apparently a high quality score is determined by having a high click through rate on a keyword, the quality of your landing page, your accounts historical performance and “other” relevant factors. Okay, sounds pretty straightforward, no problems thus far! But I must admit that “other” word sure is a doozy in the real world. (Must’ve been drafted by paralegals!) A few months later Yahoo paraphrased the adwords playbook and released their “quality index.”

The overriding concern most search engine marketers have is one of seeing too much power in one platform. When Google implemented its quality score guidelines, pay per click costs actually increased for affiliates whose livelihoods are completely dictated by their abilities to drive traffic cost effectively. My experience has shown that keyword costs on Google average 25% higher than on Yahoo or Microsoft. A merger of Yahoo and Microsoft would certainly offer a more cost effective alternative for search engine marketers who are focused on the price they pay for each click. The combined search market share of Yahoo and Microsoft is estimated at 31.5%. Meanwhile the search market share of Google by itself is 56.3%. A merger of the Yahoo and Microsoft platforms would certainly create a better distribution of “power” and lower cost per click for search engine marketers. Pay per click costs have been in a perpetual bull market for over ten years. Anything that slows down the price that I have to pay for a click or offers a potent alternative is something I will completely support.

The second major issue search engine marketers have arises from not understanding why identical keyword campaigns running on both Google and Yahoo often receive mixed “quality score” or “quality index” signals? My experience has been that these identical campaigns will often receive the blessing from one search company while simultaneously receiving the wrath of the other. I have asked pay per click experts as well as employees of Google and Yahoo to elaborate on this dilemma and, to be honest with you, understanding their responses is harder than Chinese Differential Calculus. I have more success playing with my Rubiks Cube in the dark!

How can the two leaders in the pay per click marketing industry hold arbitrary, mysterious standards in their sacred pay per click algorithms and be expected to play well together after a merger has occurred?

This issue begs the question that if Google and Yahoo do not see eye to eye with regards to defining “quality” as far as keyword campaigns are concerned what makes anyone think that a merger between these two giants is going to bode well for search engine marketers? Search Engine marketers are focused on cost, volume and conversions. That is how they define quality. And as far as I can tell that is a thousand times better of a definition than Google, Yahoo or MSN will ever come up with.

In Part Two of this series I will explore the specific pay per click ramifications of a Google–Yahoo merger for a Search Engine Marketer who primarily uses Yahoo! Search Marketing in their pay per click campaigns. Quoting Bob Dylan, “the times they are a changing.”

Questions or Comments? Contact Harald@clickbooth.com

What Does A Possible Microsoft-Yahoo Merger Mean To You, Search Engine Marketer?

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