Yahoo Minimum Bids – Good or Bad For The PPC Industry?

Just a month ago Yahoo announced the roll out of a new algorithm controlling Minimum Bids. For years, Yahoo's PPC algorithm operated on a fixed min bid ($0.10), allowing smart advertisers to take advantage of long tail cheap keywords paying only the minimum price. According to TechCrunch, Yahoo's move from fixed to floating minimum bids might suggest that a lot of the keywords were bought at minimum price without real competition, resulting in lost potential profits for Yahoo.

To start with, let's understand how the new Yahoo Min Bid factor is calculated:

According to Yahoo Blog, there are two main factors the Yahoo Algorithm takes into consideration when determining minimum bids:

Value – Calculated by various indicators, including the number of advertisers bidding on the same keyword, and their bids. In essence, keywords which are perceived to have higher value (i.e. more competition), are bound to have higher minimum bids. Furthermore, if there is relatively little competition, but other advertisers are bidding high, the minimum bid might inflate.

Quality – According to Yahoo, quality is defined by the relevance of the ad, and the CTR%. Yahoo looks at advertiser's CTR% compared to their competitors and normalize for position. Furthermore, the Yahoo! Algorithm tries to predict the ad's expected performance. According to Yahoo they try to reward quality with higher rankings and lower costs, and now, potentially, with lower minimum bids.

So what can savvy advertisers still do to keep a competitive edge on Yahoo?

Highly organized campaigns and ad groups increase relevancy and quality index. By creating targeted keyword clusters, advertisers can effectively improve their quality, aiming to lower minimum bids.

isoTree's PPC team found that running more than 2 text ads for each ad group can help increase your CTR% and quality index. Much like Google, testing various text ad styles, URL's and marketing message can help increase your click through rates, which in turn, will lower your minimum bids.

Yahoo's quality index is relative to the competition. Taking advantage of this visibility daily (which is not yet provided by Google), allows you to monitor how your campaign performs in relation to your competition.

The jury is still out on the effects of Yahoo min bids on advertising costs and ROI. The Search Engine Marketing (SEM) blogs are full of angry advertisers stating their min bids tripled overnight. Yet it seems that smart PPC management which relies on both automated solutions and daily manual optimization can still generate highly profitable traffic from Yahoo.

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