Dylan Hunter

Good for them for adding CTR as an element of PPC ranking, rather than just pure $. Interestingly enough, though I’m sure there are Yahoo ad sales guys choking right now, really should be a big gain all around:

1) For the high-paying advertiser, he’ll only pay now when his offering, (or at least his ad text) is actually relevant to the search occasion itself, thereby improving his odds on the conversion side,*1*

2) For the high-relevance advertiser, he won’t have to keep being held hostage by being outbid by a bunch of less relevant advertisers who just beat him out on bid price.

3) For Yahoo, CTR goes up, as more people find the ads more relevant, which means that their overall revenue goes up - remember, in the standard bid-price only sort, the high bidder gets position #1, but if position #1 is not strongly relevant to the actual search occasion, no one clicks on, and thus not only does Yahoo not get the $1 the poorly-relevant high bidder bid, but they also don’t get a chance to get the $.15 that the highly-relevant, but less-wealthy advertiser bid for the same phrase, so ends up getting nothing. By including CTR, (depending on the degree to which CTR is a contributor, of course) if the high bidder is also the most relevant, Yahoo gets the $1. If not, Yahoo at least gets the $.15, rather than the 0.

4) For the end-user, especially on economically-oriented queries, (mortgage, Viagra, “mesothelioma lawyer”) they get a second set of sources that now become much more valuable to them.

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*1* Yes, it will mean that he’ll need to start paying more attention to his conversion strategies, rather than just simply firing large sums of money out, and relying as heavily on the laws of big numbers to help, but in the long run, that’s also good for them in terms of improving their ROI.