Yahoo’s Quality-based Pricing is Launched

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This week Yahoo’s new quality-based pricing will launch. Unlike what the title suggests though, the quality-based pricing is intended to charge an advertising less for clicks from “lower quality” websites within Yahoo’s distribution network.

Therefore, the change really is about “quality-distribution pricing” versus quality-based pricing which actually went into effect back in February where both bid amount and ad quality determine your ad’s rank (and click cost.) Yahoo states that,

“Quality” is calculated based on conversion rates and other measurements of the ability to deliver more interested and valuable customers to you from particular distribution partner sites.”

The “conversion rate” aspect seems troubling. Where are they getting the conversion rate? Since conversion rate is calculated as total visitors converted into actions who is determining the action, the landing page component (that play a significant role in conversion) and conversion by keyword. This change seems potentially advantageous from a cost perspective but overall meaningless to an advertiser. With a lack of control and measurement it doesn’t seem to empower an advertiser to any degree.

Yahoo also states that a low quality click will receive a discount automatically. Unfortunately this seems to indicate that the advertiser may never know which websites are perceived as low quality by Yahoo against their landing page. I am not aware of Yahoo’s plans on providing a report that provides some measure of which sites produce low quality and triggered the discounts. Therefore I find little real advantage to advertisers. The change seems to be more of an effort for Yahoo to retain advertisers as they spend more money in Google AdWords.

The question is – is there any real value to an advertiser through Yahoo’s “quality-based pricing” enhancement?

About the Author

Kevin Gold is Director of Internet Marketing at iNET Interactive, a social media company operating prominent online communities for technology professionals and technology enthusiasts. Kevin is a frequent contributing author to multiple publications including Search Marketing Standard, Practical eCommerce, DIRECT, Entrepreneur.com, ConversionChronicles.com, About.com, and On Target (Yahoo! Search Marketing newsletter).

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One Comment

  1. Kevin, That's a very good point. The actual conversion rate could be influenced by a million of factors, including the landing page, copy of the ad (to ensure that it attracts the right type of visitor), etc. On top of that, Yahoo! won't be able to get the conversion data from most of the advertisers either - not everybody uses their conversion tracking. Furthermore, this move has seemed to upset a lot of publishers, even the quality ones. That may result in them moving to AdSense and further hurting Yahoo's traffic sources. So far, the whole thing seems good in theory, but it's not quite clear how it will work in reality. Boris