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Google CPC = 10x Yahoo CPC?!?

Google charges 10x for the same terms and same performance

     

algorithmist

10:01 pm on Nov 30, 2006 (gmt 0)

5+ Year Member



We're bidding in a very competitive market, so we expect liquidity to establish a consistent "market price" for our clicks, with that price implicitly reflecting converson rate, click fraud, and all the rest.

About a dozen of our terms are running on both Google and Yahoo--exact same keyword string, same match type--so they make a good basis for price and performance comparisons. As a whole, the Google and Yahoo groups convert about the same...but we have consistently paid about TEN TIMES as much for the Google clicks (min 6x, max 23x; $2-8 CPC vs $0.20-1.00). Furthermore, the Google CPC varies by about 2-3x daily, and seems independent of rank.

Given that Yahoo is a transparent 2nd-price auction, the Yahoo price should be close to the "true market price" according to economic theory. I'm willing to grant that maybe the Google terms convert somewhat better, but how can Google get away with charging ten times as much for the same thing?

I'd love to speculate, but not if my data isn't representative. Has anyone else seen similar effects?

wrgvt

11:23 pm on Nov 30, 2006 (gmt 0)

10+ Year Member



how can Google get away with charging ten times as much for the same thing?

Because in an auction-based system, those bidding on the keywords think that Google traffic is more valuable than Yahoo or MSN traffic. It's probably not just the conversion rate, but the amount of traffic too. Even if Yahoo converts better than Google, if Google can supply ten times the traffic, more money can be made with the Google traffic.

luke175

2:00 am on Dec 1, 2006 (gmt 0)

10+ Year Member



Because in an auction-based system, those bidding on the keywords think that Google traffic is more valuable than Yahoo or MSN traffic. It's probably not just the conversion rate, but the amount of traffic too. Even if Yahoo converts better than Google, if Google can supply ten times the traffic, more money can be made with the Google traffic.

I will agree with you that there is no simple explanation to the OPs scenario.

However, calling Adwords "auction-based" at this point in time is laughable. Between all the rules in place, CTR histories, account history, landing page quality score, etc. Adwords is a black box.

netmeg

10:52 am on Dec 1, 2006 (gmt 0)

WebmasterWorld Senior Member netmeg is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month



I have some keywords that are MUCH more expensive in Yahoo and some that are MUCH more expensive in Google. In fact, I'd say it's close to 50/50. They vary wildly depending on the niche and the competition in that niche. (That's across a dozen client accounts in a dozen very different niches) I don't think a blanket statement can be made that Google is always that much higher than Yahoo.

dsarathy

11:23 am on Dec 1, 2006 (gmt 0)

5+ Year Member



Hi algorithmist,

Good that you brought this up. Thrilled to know that both the google and yahoo converts about the same for you. I always felt that google has an edge because of the relevance factor. I even feel that the quality score, which is not shared with the publisher, plays the major trick and as a result everything is in dark.

But according to Google, if a publisher has got a good relevancy for the keywords focused, then he/she has to definitely pay lesser value because of the higher quality score. Does it really happen? I don't have any idea about it. Can anyone throw light on this?

D Sarathy.

[edited by: eWhisper at 5:23 pm (utc) on Dec. 1, 2006]
[edit reason] Please don't use company signatures. [/edit]

algorithmist

11:05 pm on Dec 5, 2006 (gmt 0)

5+ Year Member



[quote]Because in an auction-based system, those bidding on the keywords think that Google traffic is more valuable than Yahoo or MSN traffic. It's probably not just the conversion rate, but the amount of traffic too. Even if Yahoo converts better than Google, if Google can supply ten times the traffic, more money can be made with the Google traffic. [\quote]

Hey wrgvt,

Hold it... how do we [b]know[\b] that AdWords is an auction-based system? We do know that Yahoo is, and they expose the internals and prices to prove it, so I'm willing to take the Yahoo price as a true market price. But it's well-known than true auctions don't necessarily produce the most revenue to the seller, so maybe Google has figured out a different mechanism inside their Quality-score Black Box to extract more revenue from us than an ordinary auction would.

Your claim that you can still make more money on Google by volume beggars belief. In every industry I know, a tenfold rise in the cost of your main raw material converts profit into loss, so extra volume would only mean you lost even more. What kind of cost/revenue/volume numbers were you thinking of?

If nutmeg is right, and my numbers aren't representative, then this whole argument is a waste. But suppose they are... what could be happening? Four possibilities:

1) Google clicks convert 5-10-fold more than Yahoo clicks (not likely)
2) Google clicks cost only a small fraction of their revenue, so
you can make up the difference on volume (not likely in our verticals, at $5/click)
3) Yahoo's auction somehow under-represents true value.
4) Google's auction somehow over-represents true value.

The last could take place because of the "black box," because many players are willing to lose money up-front in the hopes of gaining "quality," and/or because players haven't accumulated enough data to know for sure that they're losing money on Google.

Ideas, anyone?

rbacal

11:44 pm on Dec 5, 2006 (gmt 0)



Ideas, anyone?

Yes. Your information is wrong, particularly in your initial post. Or rather your conclusions are wrong. Recheck them, or at least recognize that your observations on bid prices are based on limited information, with which you extrapolate without any justification.

It's interesting topic, but if you start out wrong, you can't get anywhere from there.

(There's other bad assumptions underlying your initial post, but I don't have time to go through it point by point.

vite_rts

12:17 am on Dec 6, 2006 (gmt 0)

5+ Year Member



@ rbacal

it would be really helpfull if you mention exactly why the OP is wrong,

we would all love to learn how to make money using adwords, an the OP is inviting such information

rbacal

12:52 am on Dec 6, 2006 (gmt 0)



it would be really helpfull if you mention exactly why the OP is wrong,

How many keywords are bid upon overall? (hint-millions?) How many keywords is he basing his conclusion on relative pricing? (here's a hint, he said about a dozen))

That's the most obvious and simple. I'm sure you noticed it so I didn't think it necessary to point out the obvious.

There's more but I'm sure you can figure it out. A LOT of logical errors.

Trying to explain why something is happening when it's not happening is entertaining, but...er, not likely to help you earn.

algorithmist

1:13 am on Dec 6, 2006 (gmt 0)

5+ Year Member



rbcal,

Sorry, I'm not used to someone who uses words like "wrong," "error," "obvious," and "without any justification" so freely, especially about some very specific, careful observations which were used to pose general questions and requests for more data.

The data I used wasn't "wrong"--it's still in our database and on our balance sheets--and despite being sparse and noisy, it IS statistically significant. I wish I had millions of corresponding terms to compare, but I don't...only Google, eBay, and Amazon probably have that information, and I don't work there. If you have your own numbers, please tell us, because there are economies of scale in information-gathering and we smaller players all gain by sharing.

So can you at least match me and list Google/Yahoo CPC prices for your own dozen terms, to show how "wrong" my data is?

BillyS

1:21 am on Dec 6, 2006 (gmt 0)

WebmasterWorld Senior Member billys is a WebmasterWorld Top Contributor of All Time 10+ Year Member



>>but how can Google get away with charging ten times as much for the same thing?

If this condition existed it's simply supply and demand. What else could it be? (I'm not a big fan of conspiracy theories.)

I'd love to speculate, but not if my data isn't representative. Has anyone else seen similar effects?

Nope - very similar based on my experience. But you really have to understand how each system works to make sure you're comparing apples to apples - if that's even possible.

 

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