When Microsoft made an uninvited bid for Yahoo! last February, Yahoo! mounted a “No Sacred Cows” takeover defense and explored all options, even the once unthinkable: outsourcing some search ads to once arch-rival Google. The conventional wisdom behind the partnership, which was officially announced in June and has been under anti-trust review since then, is that Google is better at monetizing searches than Yahoo!, and that as a result of using Google technology and advertisers, Yahoo! can gain a much-needed incremental boost to cash flow, even though it means letting a competitor into its business.

However, new research from Compete suggests there may be more to the story, with Yahoo! actually ahead of Google in winning paid clicks.

Looking at paid clicks, or referrals, as a % of total search queries, we see a fairly familiar picture.

Some key takeaways from chart above, which shows paid referrals as a % of search queries:

• Paid referrals ranged from 1.1 - 4.2% of search queries at the top 3 search engines, over the past 3 quarters
• Google has led the top 3 engines in converting queries to paid referrals, with 3.4% in the most recent Q3
• Yahoo! has followed closely behind Google, with 2.6% conversion rate in Q3

However, not all queries are created equal. As Jeremy Crane pointed out many queries do not lead to referral. Many of the unfulfilled queries are probably due to searchers not finding what they’re looking for. Many queries are also informational and can be answered right there on the SERP.

For example, do the search [ounces in a shot] on Google and Yahoo!, as Matt Cutts, from Google’s Search Quality group at Google, recommended in a comment on Jeremy’s post.

As you can see, Google answers the query on the top of the SERP with a handy conversion calculator, while Yahoo! doesn’t. Instead, Yahoo! offers paid results from Calibex and BizRate.

There are many similar examples of queries where the SERP itself provides the desired information, such as looking up phone numbers, locations, word spellings, definitions, etc… Sometimes, the desired information can also be found in the text snippets below each result.

For users, it’s great to get the desired information right there on the SERP, without having to click-through to another page. For search engines, it’s a missed opportunity to monetize a search.

Given that queries that return insufficiently relevant results, and SERP-fulfilled queries, can’t be monetized, we should factor these out to get a better denominator for calculating monetization efficiency. Referrals exclude these two cases by definition.

Thus a more appropriate online metric for measuring search monetization might be paid referrals as a % total referrals.

Some key takeaways from chart above, which shows paid referrals as a % of total referrals:

• Paid referrals ranged from 2.9 – 6.6% of total referrals at the top 3 search engines, over the past 3 quarters
• Yahoo! has led the top 3 engines in the ratio of paid-to-total referrals, with 5.1% in the most recent Q3
• Google has followed behind Yahoo!, with 4.8% in Q3

If we factor out unqualified queries, Yahoo! is the clear leader in terms of generating paid clicks.

Obviously there is a very important component of monetization we are missing here – show me the money! But even if revenue per search (or more accurately, revenue per paid referral) is higher at Google than at Yahoo!, that doesn’t change the fact that Yahoo!’s SERPs deliver more paid referrals on a percentage basis. In other words, volume and average revenue per paid referral being equal, Yahoo! would make more money in paid search.

Of course, this is not the case. According to Compete’s latest search rankings, Google has more than 3x the market share of Yahoo! Also, Google has a vast legion of advertisers that penetrate deep into the long tail of small- and medium-sized businesses. This makes Google’s keyword auction markets more competitive and can drive up keyword prices.

There are other important factors to consider, such as the interaction of algorithmic and paid results on the SERP. A better comparison of Ad Words and Panama, Google and Yahoo!’s respective paid search technology platforms, would control for this interaction, which is critical.

However, these findings should still give heart to Yahoo!, which has taken a drubbing the press and the markets on the conventional wisdom that it’s inferior to Google in monetizing searches. As we have seen, when we take out those searches that don’t qualify for monetization, the old Purple & Yellow actually leads the field.

Analyze more domains: + +

Done reading? subscribe: To get an automatic feed of all future posts subscribe here, or to receive them via email enter your email address in the box in the right column.

Link to This Post:     

Posted under: Online Media & Search | Trackback Link | Permalink | Share - Save - E-mail