When phase two of Yahoo's Panama went live in early February, the new ranking algorithm almost immediately started comparing ad listings for every keyword to its neighboring listings. Only one of three things could happen for any specific keyword/creative combination within an ad group:
Relevance is essentially a bell curve with an average and a standard deviation. If an ad is more relevant than average, its position would be the same as if it had raised bid price. That's because Yahoo's new algorithm multiplies predicted CTR (define) with bid price to determine a score like Google's AdRank.
Many people are confused about the way Yahoo's algorithmic change resulted in dramatic positional changes on the PPC (define) SERP (define). The easiest way to think about it is if the differences between the predicted CTR are greater than the differences between bids (on a percentage basis), you can expect Yahoo to swap positions.
Consider a case where current bids and predicted CTR (assuming top position) for the search term "taxes" are:
|Company||Current Bid ($)||CTR (%)|
Under Yahoo's old auction system, the ExpressTaxRefund listing would appear at the top. Differences in bids are only about a 3 percent range. However, the differences in predicted CTR are much higher, approximately a 23 percent range. The scores used by Yahoo to determine new positions with the new algorithm are significantly affected by the CTR percentage.
In this example, it a bid of more than $1.23 is needed to take the top spot. If $1.23 happens to be above the max bid ExpressTaxRefund is willing to pay, its position will drop significantly. How far it drops depends on the overall scores of neighboring listings. The position drop for an ad listing that's significantly less relevant, as measured by predicted CTR, can be dramatic, resulting in a loss in clicks and reduced spending.
Based on the above example, when the algorithmic change kicked in, many advertisers found themselves on the relevance curve's positive side. Yet just as many listings fell to the negative side. Most often, an individual account/advertiser will have a disproportionate number of ads ranking either better or worse than average. Part of this effect is due to the strong impact of the domain name/URL in searcher preference and CTR.
If you've been blindsided by Yahoo's changes, all's not lost. Relevance and CTR aren't entirely driven by the URL. Ad creative and the right campaign structure have a lot to do with relevance. There are steps marketers should take to ensure relevance moving forward. Even if you were lucky enough to benefit from Yahoo's algorithmic change in the short term, your competition will implement these kinds of relevance-enhancing tactics. This puts any newfound campaign improvements at risk.
To enhance relevance:
Apply all the things you've learned in one search engine to the other ones. They've become more alike than different. To keep on top of your game, embrace best practices and use each engine's technology optimally.
Join us for Search Engine Strategies April 10-13 at the Hilton New York in New York City.
Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.
Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.
Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.
May 22, 2013
1:00pm ET / 10:00am PT
June 5, 2013
1:00pm ET / 10:00am PT