Last Thursday and Friday, Yahoo! Search Marketing rolled out their new pricing structure. The gist of this update is that minimum bid prices will no longer be fixed at $0.10 and will instead be based on quality factors (similar to Google’s Quality Score). From a big picture view, this seems like a logical progression for YSM. However, many advertisers have expressed frustration with this change and its adverse effect on their bid prices. Today I’ll quickly recap what’s changed in your Yahoo! accounts, why you need to check your minimum bids and give you a few points to ponder.

The new minimum bids are a little bit like auction house reserve prices, and can be based on multiple factors, such as your keyword quality and the keyword’s value—or how much we think that keyword is worth.

Yahoo’s first step towards a quality based PPC platform was with the Quality Index system for ad texts. This gives your ad text a score based on how relevant your copy is in comparison to the ads that it competes with. But Yahoo’s push to institute quality based minimum bid prices is all new. Before, all keywords had a minimum bid of $0.10. Theoretically, you could still pay less than that based on relevancy, competition, etc., but $0.10 was the bottom line.

The new process follows the Google model and essentially enforces a sliding scale for minimum bid prices. Now, a keyword you previously bid $0.10 could have a minimum bid of $0.50 or higher depending on quality, value or how much Yahoo! thinks that it is worth. Yes, on the flip side, your minimum bid could go down. But I’ll get to that later.

What does all of this mean for you? If you haven’t been checking the alerts in your YSM accounts, or at the very least your email – you could have keywords labeled as “Pending Inactive, Bid Too Low.” Keywords with this label have been affected by the new pricing structure. If this is the case, Yahoo! will give you a grace period of “several days” to increase the bid accordingly. After the grace period has ended, your “Pending Inactive” keywords will be shut off until you adjust the bid.

Yahoo! Keyword Labeled “Pending Inactive” - New Minimum Bid Pricing Structure

Now that this new pricing structure has been in place for a few days, advertisers are beginning to react to the roll-out. As far as I can tell, the reaction has been negative. Yahoo! accounts that we manage here at PPC Hero have been affected too. In every instance, we have been asked to increase bids. For a few accounts the bids increased to the point where we became quite uncomfortable with the new price.

What really irks me is that Yahoo! isn’t being forthright with information on keywords where the minimum bid actually decreases! There’s currently no way of knowing when the min. bid decreases, thus telling us advertisers we can actually lower our bid due to our relevancy.

When you consider the initial reaction and even our preliminary thoughts on this update, it seems that Yahoo! is really fattening their revenue stream as opposed to increasing relevancy for the end users. To give this a rough test, I have placed a highly targeted keyword into an isolated ad group in one of my Yahoo! accounts. The keyword is the name of the website, the keyword is in the domain and the keyword is plastered all over the landing page. Not to mention it’s about as relevant as it gets. I’ve set the bid to $0.10 and I’m going to wait and see what happens. If I’m asked to increase the bid: a) I’m going to get angry and b) I’ll be pretty certain that Yahoo’s #1 goal is to increase revenue.

What are everyone else’s thoughts on Yahoo’s new minimum bid pricing structure?