Microsoft Revenue Per Click Equals Google's

Microsoft adCenter has recently increased their revenue per click to match Google, in spite of having a small chunk of the search market share (maybe 25% between Bing and Yahoo! Search to Google's ~ 75%).

All we hear about Google's love for the scientific method, the superiority of their relevancy algorithms, them creating the best thing for advertisers, etc. has prettymuch been reduced to fluff.

Google is much more aggressive at forcing searchers down a set path, has a broader ad feature set, has more (~ 3x) search marketshare, and yet Microsoft is able to compete. And they have done this against a competitor which keeps making incremental changes to build additional yield.

The Arbitrage Game

How was Microsoft able to increase their yield so much? If you go back 5 years, at the time Yahoo! powered a greater share of search traffic then than Microsoft does now, and their ads were powering both MSN and Yahoo! Search. How did Microsoft catch up with Google when Yahoo! failed to compete?

One word: arbitrage.

I have long railed on Yahoo! for screwing advertisers with fraudulent traffic sources. Arbitragers destroyed the value of Yahoo! clicks & it wasn't until 2010 that Yahoo! allowed you to opt out of the fraudulent traffic.

Even today, Yahoo! still arbitrages search traffic through their home page's trending now section.

Notice the word highlighted in yellow. In most cases Yahoo! will typically spike one or two commercially oriented keywords into their trending box. Having ranked for numerous of these keywords, I can tell you that they can drive thousands of search clicks...which can be an expensive shot of traffic if you are paying $5 a click for them. The 'high blood pressure' might be a Dollar or two, but I have seen some expensive finance keywords in there as well.

A Look Under the Hood of Smaller Search Engines

The thing to understand about paid sources of traffic is that as soon as you add the element of payment there becomes a set of mixed incentives along the value chain.

I won't tell you which search engine it was, other than to say it was a publicly traded one, but about 4 years back a second tier search engine sent me a spreadsheet of [keywords * their bid prices] and wanted me to "generate traffic" for them.

1). Direct Partnership - Pull our ads to display on the site(s) for high paying keyword terms. The traffic must be unique and convert well for the advertiser (search engine traffic is the best). We can display ads in a variety of format and target the top terms on our network. Makes for a good compliment to other revenue streams. 2). Aggressive Referral Partnerships - I will compensate you and/or any other contacts in the black hat SEO realm up to 10% of all revenues generated by referred partnerships. (There are some SEO guys out there doing 1K+ per day in revenue - 10% = 100.00 additional per day for the life of those accounts). I am definitely willing to compensate nicely for referral of these contacts for Direct Partnership deals.

That second tier set up is of course why so many affiliate blogs recommend signing up for every affiliate network in the world. But the big issue with Yahoo! was that (in spite of being a major leading search engine) they were still operating like the 3rd tier folks, with certain publishers being able to access high payouts and CPC stats. Some of the folks running the Overture feed where whoring out out to others & one well known webmaster even has the word "clickbot" in his nickname. Yahoo! made it hard for advertisers to opt out, and that is what killed their click value.

What coincided with Microsoft's increasing revenues per click? They reined in the arbitrage folks.

"Although the Yahoo-Bing integration has been ongoing for several months, during which time we were able to adapt well to the volatile environment, in mid-December we began to experience average revenue per click decreases and the strategies we customarily deploy for responding to such decreases were not as effective," said Geoffrey Rotstein, CEO. "As a result, we are maintaining substantially lower traffic levels until we have better insight into the factors contributing to this issue. The Company is currently working diligently with the teams at Yahoo! in an effort to implement any necessary adjustments to this new marketplace." "We have always been able to adapt quickly and positively to changes in the industry as a result of our intense focus on data and analytics. We intend to apply this same discipline to respond to these issues, as we continue to receive information from Yahoo! that will assist us to adapt our system for the new advertising marketplace," added Ted Hastings, President. "We intend to make whatever changes are required within our Company to ensure a fast and sustainable response to this new market".

SEO = Still Amazing

But the purpose of this post is to point back to the value of SEO clicks. Advertisers spend over $30 billion a year buying ads from search engines & the organic search results still get the bulk of the clicks. Of course search engines are pushing to eat the organic results as well, but for anyone who has a strong organic traffic stream it is easy to under-appreciate the value until you realize how scarce and expensive pure & clean search traffic is.

Make hay while the sun shines! :)