The first couple of weeks of full-bore Bing-Hoo are in the bag and the results...are VERY interesting! Teasing out the winners from the losers is challenging. There are several different angles to consider: did Yahoo or Bing benefit more? Did Yahoo's syndication partners win or lose in this? Is the combination of Bing and Yahoo going to hurt Google? First, here's a look at the transition time schedule as one of our clients experienced it: Bing certainly picked up many new advertisers which should have a two-fold positive effect on their revenue: first, there should be a greater number of relevant ads to chose from for any given search, improving the CTR on ads in general; and second, it creates a tighter bunching in the bid landscape decreasing the gaps between what advertisers bid and what they actually pay. Position bidders may find more folks willing to bid against them for bragging rights. All of that should result in higher RPM, revenue per thousand impressions. But the countervailing problem is the reduction in traffic quality and the inability to segment created by merging the Yahoo and Bing traffic. As we anticipated, the data suggests that bidding to the mean value of traffic (keyword by keyword, ad by ad of course) results in splitting the difference between average cpcs on Bing and Yahoo for the combined entity. This creates inefficiencies which should lead to reduced ad spend and sales in aggregate. The data seem to bear this out. Looking first at the relative market-share of Bing and Yahoo combined vs the total including Google (just looking at paid search, not content) shows a pretty significant drop exactly when the traffic shift occurred. Let's take this apart to isolate the causes. Question 1: Has Google done something to gain share during this period or have they been in essentially steady state? Answer: No, for this basket of accounts, aggregate spend on Google actually trended down a bit during this period. This relative gain in market-share for Google is coming with no particular benefit to Google, it's simply lost revenue for Bing-Hoo. Question 2: Is RKG dropping the ball? Answer: No, efficiency targets have been maintained in aggregate for this basket of clients. We did a good job of anticipating the drop in traffic quality and adjusted bids accordingly. Question 3: Are other advertisers and agencies dropping the ball? Answer: Yes, to some degree the data suggests that others have not adjusted to the new economic realities. In a rational marketplace with efficiency driven advertising we would see all bids dropping to reflect the change in traffic value, and we'd end up in the same position on the page relatively to others. We don't see that happening, yet. Question 4: Is irrational bidding by others the whole story? In other words, as others who budget search by engine watch their ROI decline and eventually pull back bids, will Bing-Hoo regain all the lost share? Answer: No, while CTR and click volume have dropped some as a result of lower positioning on the page, the real driver in the retail space is the decline in traffic value and CPCs. While Bing-Hoo's clicks as a percentage of the total paid search clicks have dipped from ~21% to below 20%, it is the relative decline in what rational advertisers can afford to pay for those clicks that has truly dropped off the table. Question 5: Is the traffic quality differential driven more by conversion rate differences that could conceivably relate to ad relevancy, or demographics which would be much harder for Bing-Hoo to fix? Answer: Conversion rates are certainly one component, but the Average Order Value is almost as important in the retail sector, which can really only be a function of demographics. The wackiness at the end of the graph is a bit troubling to me, and highlights an important caveat to the entire post. I studied a subset of our retail clients, so a limited sample totaling about $1M per week in spend in one sector of the paid search space. Moreover, I studied aggregate values rather than medians meaning big changes from our largest clients have a disproportionate impact on the numbers, and I suspect that explains a piece of the wackiness at the end. Doing this right would involve account to account and even keyword by keyword comparisons that I just don't have time to do. That said, we find that these hacked together studies generally show results that are in keeping with the more carefully crafted follow ups. CONCLUSIONS If we accept that this data is at least directionally valid, we anticipate that account to account Bing-Hoo will generate less revenue for the engines (and fewer sales) than they had generated separately. This decline may be entirely wiped out by the increase in the number of advertisers paying in, and as we know advertisers don't all behave rationally, which may mean that budgets don't change and efficiency simply suffers at the end of the day. We shall see. I'd love to hear what others are seeing, particularly in the lead generation space.
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