Those publishers who fled Google AdSense for the Yahoo Publisher Network because of revenues being affected by the impact of smart pricing on EPC will now have to content with YPN’s own version of smart pricing, called Quality-Based Pricing.
Essentially, this means if your traffic that clicks on your YPN ads doesn’t convert for advertisers, your revenues will be negatively impacted. If you tend to have quality traffic, you shouldn’t see a problem, but those with sites with traffic that tends to convert poorly for advertisers could be affected in the same way that Google AdSense smart pricing affected revenues.
But quality of traffic is not the only thing that Yahoo is taking into account when it comes to quality-based pricing. Original traffic source as well as implementation type are considered as well. So Yahoo could discount publishers for specific traffic sources, whether it be from spammy third tier engines or theoretically even taking a competitive stance against Google or MSN traffic while boosting Yahoo referred traffic.
If a publisher is earning less for a click than the same ad on another site would earn, that doesn’t mean that Yahoo is pocketing the difference. The savings are passed on accordingly to the advertiser, just as is done with Google’s smart pricing.
Of course, this does bring up the whole issue surrounding relevancy. If I have a site about hockey yet am seeing ads for mortgages and long distance, those ads are definitely not targeted to those visitors. And as a result, the odds of a successful conversion – and value – for those advertisers is seriously impacted. So publishers who are showing irrelevant ads for their content could find themselves losing revenue through no fault of their own, but simply because Yahoo is not providing ads that are targeted to the content.
It is a gutsy move to make at this time because of the current relevancy issue, although I am not surprised they have decided to follow the path Google set with smart pricing. And the end of the day, Yahoo wants to encourage advertisers to advertise on the content network, and this is one way to give advertisers the warm fuzzies when they know that if a specific site has lower quality traffic that they simply won’t have to pay as much for that click.
Yahoo is going to roll out the new quality-based pricing slowly, where it will first be released for specific market & keyword areas, although the specifics of which ones has not yet been released yet. But they expect to expand it in the coming months.
What do you think about this new quality-based pricing?