Thursday, July 28, 2011

Bing and Yahoo Merger Not Paying Dividends

In an effort to match Google's presence in the world of search marketing, Microsoft (Bing) and Yahoo merged so that each search engine displays Bing's results for a search query. At the time, for Yahoo this seemed like a step in the right direction, as Bing has made somewhat of a strong push so far in 2011 to capture our attention through advertising and increase their market share as quickly as possible. However, Yahoo announced recently that their second quarter revenue generated from search is down 15% from last year at this same time. And it turns out the reason why may be somewhat complex.

It is important to understand what generates the greatest source of revenue for search engines like Google - advertising. When you type in a search query and results are displayed, the ten URLs that show on Page 1 are "organic", that is, the companies did not pay to get there. Rather, an effective site structure that addresses technical aspects that search engines appreciate, on-site optimization, and consistent link building has earned them their position. Hence, it is organic because they have not paid for the position.

However, at the very top of the results page and towards the very right of the results page, you will see the paid advertisements that appear. These companies are operating on a "pay-per-click" (PPC) structure. Specifically, they do not pay to show up, rather, they pay any time someone actually clicks on their add when it is displayed. Whoever is managing the paid search campaign will pre-determine what search queries they want their ad to show up for. And it is those clicks that drive revenue.

So, in simple terms, the more queries that advertisements are actually displayed, the greater the chance that someone actually clicks on an ad; likewise, the greater the earnings potential for Google, Yahoo, and Bing. The primary reason that the Bing-Yahoo relationship has yet to pay off is that the algorithm has yet to catch up to Google's when it comes to "broad match" phrases.

If I am running a PPC campaign (in other words, I am the advertiser), I choose what search queries should trigger the ad. I would also have the power to select the "broad match" feature, meaning, if I want the ad to show up for "bedroom furniture stores", it could also display for a query that does not contain the exact keyword. At this time, Yahoo and Bing are not displaying a lot of ads for broad match queries, thus leading to a decline in revenue because people don't even have an opportunity to click on a sponsored ad. On the other hand, Google has with few flaws optimized their algorithm to account for this. As a result, despite the goal of competing on the same turf, Yahoo and Bing have yet to match their search engine counterpart and revenue continues to decline.

No comments:

Post a Comment