Aug 232010

Dropping Bids on Bing: Be Ready

When Bing picks up all of Yahoo's traffic, be ready for some turbulence. Why? Because advertisers are going to learn very quickly, that the average value of the traffic coming from Bing ads is likely to take a hit. Those who drive by efficiency metrics will need to drop bids on Bing; those who spend a budget should expect a decline in ROI.

The principal is similar to what we discussed with respect to the syndication networks last year. Mixing traffic of varying values and preventing segmentation forces smart marketers to bid to the averages. This means spending a bit less on the higher quality traffic than we should and a bit more on the lower quality traffic than we should. Inability to parse the traffic and bid it differently leads to less spend at the same efficiency or reduced sales off the same budget.

Bing is rolling out controls for the Yahoo syndication network, so we'll at least be able to segment that traffic, but part of the deal between Bing and Yahoo requires that advertisers not be able to discriminate between traffic and traffic.

We promised a while back that we'd take a look at the differential in traffic quality and that turned out to be a bit trickier than I imagined it would be.

The trouble is that done sloppily, one could easily end up comparing apples to oranges and producing bad numbers. For example, Yahoo doesn't really have an "exact match" option, so comparing a Yahoo ad to a similar ad on Bing one has to tease out the effect of the different matching algorithms. Additionally, failure to exclude the syndication partner effect would also skew results. Finally, it is a mistake to view the data in aggregate; because the competitive landscapes are different, a greater portion of traffic on one engine may come from higher converting keywords.

My first reaction to all these complexities was to put off doing the analysis... :-)


It turns out not to be all that difficult.

Instead of comparing ads, I compared the results of identical user search strings, and restricted the results to those searches coming from the engines' domains. Vagaries of match types could mean that some users were served less than ideal ads with less than ideal landing pages, skewing the results somewhat. We then also had to restrict the study to those user searches that led to statistically significant conversion volumes on, so that the comparisons would be meaningful. That limits the number of cases quite a bit.


In most cases, the quality of traffic on was somewhat lower than similar traffic from Bing. We found the median to be about -15 %. However, the differences seem to vary by vertical, and, sadly they even seem to vary between search strings for the same advertiser! As always, your results may vary, so we strongly encourage you to do your own research.


The traffic quality differential isn't the only piece of the puzzle, though. The other key variable is the volume discrepancies between the engines. For some advertisers Yahoo brings in 100% more traffic than Bing does and as such when the traffic is combined, the lower Yahoo traffic quality has a disproportionately large impact on the combined average forcing the bids down more than simply "splitting the difference" would suggest.

For convenience, I built a little table showing the impact of quality differential and volume differential on what needs to happen to the Bing bids.

As an example, the highlighted cell shows that if the Yahoo traffic quality is 15% less than Bing's, and Yahoo brings in 75% more of the traffic than Bing, then the combined impact on Bing bids would be to drop them by about 9.5%.


We can't study this cleanly for very many user searches because the data is so sparse. Since there appear to be differences between keywords for the same advertisers, accurately anticipating the necessary bid adjustments is beyond difficult. Also, it's not clear that the clean apples to apples view is the right view. Bing's broad matching logic is different than Yahoo's and that means that the same searches on will fire different ads than would have been fired by Yahoo's system. Hopefully they'll fire more targeted ads, but the point is some of these differences don't lend themselves to data modeling.


There is going to be a big thunk in the performance of Bing ads as the traffic goes from being 100% searches to mostly searches. The thunk will be HUGE for those who don't separate out the syndication partners. The slow transition may keep this from raising huge fire alarms, but it will fundamentally change the quality of traffic on Bing.


This could actually end up having a material impact on Bing's revenue. Obviously, Bing will generate some revenue they didn't get before from ads they're serving on Yahoo and the Yahoo syndication network. However, most of that revenue will still go to Yahoo. Couple that with the fact that advertisers will likely find themselves lowering bids on Bing by 5%, 10% or 15%, and Bing's revenue could take a hit.

...expecting calls from the investment community any minute now :-)


20 Responses to "Dropping Bids on Bing: Be Ready"
AO says:
Great post.
Great insights, George! I will definitely be sharing this with my team. Thanks for sharing.
Hi George, I fully concur with your analysis , although my numbers are a bit different. In our last quarterly report, we found that Yahoo's traffic was about 25% worse than Google's and Bing's was 25% better. So the net differential is over 50% in our sample. Also we found that if $1 spent on Yahoo's O &O bought back a dollar (break even) then Yahoo's syndication would only bring back 40 cents. Compare that to Google's 80 cents. More info here: Bottom line, I understand the business need for the same bid, but essentially Bing's traffic is going to subsidize Yahoo's due to which the marketplace becomes more efficient. In a rational marketplace, you should see some spend going from the combined Bing/Yahoo entity to Google until the marginal ROIs equalize. But that said... advertisers are not always rational, are they ? ;)
Chad, AO, thanks for stopping by! Sid, your numbers are interesting and scary! Did you look at exact match (user search) only for the comparison, or did you compare Yahoo broad match to Bing broad match? I shied away from the latter approach simply because the argument could be made that Bing's broad match is more targeted than Yahoo's, hence the conversion rate of traffic will improve when served more targeted ads. I tried to minimize that effect to the greatest extent possible. That said, I'm not sure apples to apples is the right way to think about it. Agencies that are less careful than yours and mine probably won't even segment out the syndication partners, so those of us interested in performance may be talking to ourselves :-) No question the folks who think budget first, ROI second may not behave rationally in any case. Thanks for sharing!
Kenny says:
Yeah, when I found out that we weren't going to be able to bid separately on traffic versus traffic, I was like "WHAAAA"??? I don't feel like that's the smartest move, because non-savvy folks wouldn't do it anyway, but you'd still give more advanced users the ability to get more granular and improve their efforts, which means they may spend more money with you over time as they can prove value. This is something that I feel like Google does fairly well as they roll features. To most users, those changes mean nothing and they won't take advantage of them, and for Google there is usually a hidden lining of higher click prices, but to the SEM folks out there, there is more control...or at least the illusion of it :) Like you said - potentially less revenue for Bing, when in the paid search world one might be spending disproportionately more with Google already in relation to search market share numbers already (upwards of 80% of paid search dollars or more).
Kenny thanks for your feedback. I couldn't agree with you more; each engine should provide an advanced set of controls that the sharp practitioners can use, including site by site control over syndication bids. The fact that most people wouldn't begin to know how to use them doesn't mean they wouldn't benefit both the advertisers and the engines when used by those of us who are paying attention! George
Hi George, I didn't go as granular at a keyword level as you did. We looked at overall spend and revenue numbers for a set of advertisers. Like you said, it is very hard to do an exact apples to apples comparison at a keyword level as the matching algorithms work very differently. Now all my clients (and I suspect yours) are ROI focused so I expect Yahoo's spend share to keep coming down (and trend-wise, so far, they indeed have lost marketshare of spend). Bottom line: While we can speculate all day, all our analyses point to a less efficient marketplace in the short run at least.
Jun says:
Another good post there George. We haven't rolled out with our "alliance" campaigns just yet. On Wednesday we'll be meeting again with our YSM rep. Our last meeting wasn't successful at all since everything were just questions. Hopefully he'll have the answers by Wednesday. One of the questions my team asked the YSM rep was "Will we be able to separate Yahoo traffic from Bing traffic?". We will get the answer in 2 days. But I think you have answered it already. Please correct me if I'm wrong, but as I understand from your post, there's no easy way to do it. What my team is scared of right now is if we lose control of the Yahoo Search Partners as they are a very different type of audience.
Sid, I think you're right. Anticipating the impact is likely difficult to the point of being impossible. There is likely to be a big thunk in performance as advertisers adjust to the new reality. Jun, thanks for your comments. Under the current plan there will be no way to target or traffic separately; this was part of the deal negotiation as I understand it. Initially the Bing folks weren't sure whether separate targeting for the Yahoo syndication partners would be available out of the gate, but apparently they have those controls ready to go, so that shouldn't be a problem. Should make for an interesting end to Q3 beginning of Q4!
Tad Miller says:
George, We were actually interviewed by the Bing/Yahoo transition team about what we would want as a best of both worlds and what we absolutely didn't want to see happen with the transition. For us it all comes down to the Yahoo Search Partner Network being for the most part "Poison". We were told in that meeting that Yahoo actually will be getting a 100% share of revenue on all of those clicks - but I haven't been able to find any other confirmation of that. This could explain part of the motivations to "mix" traffic. We have seen our Yahoo traffic volume and quality significantly decline ever since the announcement of the search alliance. For our largest clients the Bing and Yahoo traffic volumes are actually even. Interestingly enough, the cheaper the product the better it seems to do from a conversion standpoint on Yahoo. I think that their have been significant demographic changes in Yahoo over the summer and I don't see the possibility of it's ability to convert getting any better - even when powered by Bing. I am in agreement - that bidding tactics on Bing are going to change. We typically see our Bing clicks as almost always being cheaper than the other search engines - I'm very curious if this will stay the same.
Thanks for dropping in, Tad. We still need to do lunch sometime!
Great post George.
Jun says:
Thanks for the clarifications George. 1 more hour to go before the meeting with our Yahoo rep. We're certainly hoping they would allow advertisers to bid separately between Yahoo and Bing, or maybe even just separate the Yahoo search partners.
Jun says:
Hi George, Just wanted to share an update from my meeting with our Yahoo rep. Yep, you were right. It would be a unified campaign, so there's no way to have a separate campaign for both Yahoo and Bing, now or in the near future. He assured us though that we can create a separate campaign for both search and content/display which means we would still have control over Yahoo Search/Syndication Partners which was our main concern.
Robert Dicks says:
Interesting that this will have an impact on Bing’s revenue it will be interesting to see what impact it will have on Microsofts revenue if big advertisers lower bids on Bin and as Tad mentions bidding tactics on Bing will change.


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