Yahoo’s Exclusion of Inclusion

In our post regarding the Yahoo-Bing search deal back in July, we speculated that the deal would put the future of paid inclusion at risk. It seems that Yahoo’s $235 million dollar investment in Inktomi back in 2003 is coming to an end.

The case for keeping paid inclusion is that it makes money. With paid inclusion, advertisers could pay to be well ranked on allegedly “unbiased organic” rankings. The case for dropping it, is integrity – that the nature and value of organic search results are that they are based on relevancy, not spending by the advertiser. This (if you remember the wild west days of the Search Engine M&A madness back in the early 2000’s) was a real hot topic for Google which continues to beat the drum of unbiased search results.

Well, today it appears this dilemma has been resolved. This is likely a result of the ongoing discussions between Microsoft and Yahoo regarding the application of the Bing algorithm and how the Bing technology will work within the Yahoo structure.

Bing does not offer paid inclusion (MSN dropped Inktomi after the Yahoo acquisition in 2004), and now, neither will Yahoo.

The progression of search engines’ indexing capabilities (e.g., increasing frequency of indexing and the ability to crawl and index complex dynamic content) has raised questions on what the real value of paid inclusion is. Sure there are discussions about managing your message by controlling how your descriptions and titles show up in the search results and being able to regularly submit content that is dynamic in nature… but really, is it still needed?

From our perspective, this is a very positive step. The concept of paid inclusion in natural search results was always specious.

Eliminating paid inclusion makes paid search ads on Bing-Yahoo more valuable, and it makes the natural search results more powerful. This is better for the consumer, as organic results will now align better with the needs expressed in the search query.

We believe this should be a boon for Microsoft as it will drive more advertisers to leverage the standard bid auction process to place paid search advertisements. It also simplifies the management of the search program and the integration of the Yahoo and Bing systems. Also, it will make the auction more competitive and liquid which will likely drive up CPCs by ~10% as advertisers move their budgets into the auctions.

So goodbye to the days of…

• agencies selling paid inclusion on a cost per click with the idea of performance-based SEO.
• undisclosed discounts for agencies based on the aggregate of clients’ budgets.
• the unbelievable markup costs that agencies put on the flat rate category CPCs.
• the absurd amount of money spent driving branded traffic through a top level domain.
• the claims that “our xml feed generator is better than yours”.

Whether you were a proponent of paid inclusion or not, there were definitely times when it was a good option (for instance, if the organization was hamstrung with SEO implementations or had needs around product churn).

For Covario customers – only 15% of which are leveraging paid inclusion on Yahoo, here are some actionable insights to help minimize the impact.

Actionable Insight 1: The traffic generated from paid inclusion will have to be replaced. This can be done by investing in improved SEO, by increasing paid search budgets or with a strategic balance of both.

Actionable Insight 2: If you’re looking to invest in SEO improvements to replace lost traffic from paid inclusion, care should be taken to invest first in improvements that create a path of least resistance for the search engines (for Yahoo’s Slurp in the short term and Bing’s algorithm in the long term).

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