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What are the effects of a higher CPC for advertisers? Nobody knows yet but my guess is that advertisers at the lower end will drop out as it becomes less economical to hold their keywords; advertisers whose ROI can afford the higher rates will continue to advertise but at the higher minimum CPCs. For publishers it looks like sites that convert well will see a big boost in revenue (assuming Google doesn't change the profit split) and scrapers etc will see a lot more PSAs.
Some competitive keywords do of course trade at much above whatever minimum Google sets. There will likely not be an increase in earnings for publishers already getting those ads. However, lower down the scale there will be some trimming of advertisers and that will likely affect some publishers who are getting the cheaper ads in those categories ... and will lower their overall income.
Am I making any sense? Don't know. It's late and I'm just off home. I may wake up tomorrow and find that it's all a dream.
A week from now, if the site has had a streak of days well above the previous average, then I'll say something happened.
That seems to be inline with what I've seen on my most profitable channel.
Ads that are only related on the fringes that are bidding high enough to run, and getting a terrible CTR.
These ads seem to be paying about 50% more than my old group of advertizers, but the CTR is about 1/6 of the old group.
I blocked the new guys, and the old group reappeared.
Of course it could be other factors. But this channel has been rock steady for over a year. Maybe the timing is just a coincidence.
...that the small guys with the lower budgets are all going to pull their campaigns since the keyword bids are doubling and more in some cases
This is just not the case.
We are a small advertiser (& publisher) and most of our search terms have not changed in price - many are at 5¢. There were a few where I had to increase the bid if I wanted to keep them however most were iffy, very low volume terms so even doubling the bid will have little impact.
Overall I like it as it will enable us to stick an ad under some high volume terms with multiple meanings that we were unable to keep running. We've had no problem in Over Yahoo keeping this term with a good CTR but never were able to in AdWords.
We read the success story on Adsense, about their Adsense/Adwords duel clients, and thought we would give it a try. It was not working great for us at a nickle, at a dime, we are pulling out. I play the penny slots at Vegas... that pretty much explains my thinking. I will gamble a few cents, but when you start talking dimes, I get nervous, unless I see an ROI that is at least minimum. If the ROI is good, I increase my bets. (tight wad)
the slots machines here, don't accept anything less than a quarter, that's $0.25!
With Y! on the horizon opening up the market even more, the last thing Google would need is an exodus from the small advertisers. 1-cent clicks are not new, I've seen them on my site for over a month now, sigh.
Y!overture has had .10 minimum bid prices for a long time, so I don't see advertisers making an exodus to overture.
It's too early to tell what type of effect this change will have in regards to Adsense.
Maybe a month's worth of data would be a good sample?
Penny slots are all the rage here in Nevada. Some are deceptively expensive to play - up to 40 pay lines and a max bet of 10 cents per line (as I recall). Nickels, quarters and dollars are cheaper to play.
And my nicely targeted AdWords campaigns are enjoying extremely high CTR at half the cost. For me Google appears to have got it right this time!