Yahoo Changes PPC Ranking

Yahoo has announced an overhaul of its paid search program.

The most notable change is a switch to incorporate the click-through rate of listings into the ranking algorithm instead of simply ordering the paid listings by the highest bids.

Google and LookSmart’s paid search programs have been doing this for some time now.

This change is not going to please a lot of search engine marketers who make their living off of manipulating the Yahoo marketplace. These SEMs constantly alter keyword bids in order to drive advertisers out of their positions, or worse, hike up prices to make a keyword so unprofitable that most advertisers are driven out of the auction because their budgets were eaten up.

Yahoo’s straight CPC auction made it pretty easy to automate these strategies and implement them on a wide scale basis using bidding services.

To the uninitiated, the Yahoo marketplace has been a pretty risky place to spend money. Advertising on keywords at Yahoo has been analogous to walking into a Vegas casino and sitting down at a table with a bunch of card sharks.

The move to incorporate CTR into the ranking algorithm should level the playing field at the same time that it makes Yahoo more money.

Now instead of just ranking the listings based on what the advertiser is willing to bid, the listings will be ordered based on how much money they will generate. The base formula for this sort of ranking algorithm is CPC x CTR = Rank. Listings are ordered based on the probability that they will generate revenue.

But even this approach is not foolproof or impervious to manipulation.

Google recently added a secret opaque quality variable into their paid search ranking formula to drive out SEMs who were spamming the marketplace with bids on thousands of irrelevant keywords.

It will be interesting to see how Yahoo evolves their marketplace over time to deal with ever changing crop of brute force bidding tactics.

RIP.