In the great scheme of things this is a tiny issue, with a tiny settlement as compensation: $750K split among all Yahoo advertisers. However it brings some interesting questions to light. Yahoo is offering this money in response to a class action suit OMS vs Yahoo. Here's the low-down: In Yahoo's current bidding system you pay a penny more than the person below you is bidding. So, if I'm bidding $0.50 and the person below me bids $0.30 and the person below her bids $0.20 then I pay $0.31 per click, the next pays $0.21 and so on. At issue is the question: what happens if the person bidding $0.30 runs into her daily budget cap? Her ad is no longer showing, so why should I pay $0.31 per click and not $0.21? Moreover, what happens to the bid for position systems which say: I want to be in position two, how much do I have to bid to get there? The answer they came up with was $0.31 not $0.21 because there was no way to tell who's ads were being impacted by budgets. Pretty esoteric stuff. Indeed, a wag might call this the price of bidding to position, instead of bidding to one's economics. Nevertheless, Yahoo is putting a small amount of money on the table for those effected, which is probably everyone to some degree. It does raise some interesting questions about Yahoo's future. As they migrate to a closed auction a la Google, with click-through-rate factored into the bidding, what will happen to the average cpcs? I have a notion that a great deal of the bid for position battles were fired by hubris, and the open-auction environment -- allowing retailers to see exactly how much more they need to pay to be in position X -- added fuel to that fire. It will be interesting to see if the closed market place will cool the bid inflation caused by all that jockeying. Yahoo claims to be launching their new platform in Q4. Anyone care to wager that they push this to Q1 fearing retailer mutiny? We shall see!
Join the Discussion