NEW YORK When Yahoo! announced last month that it planned to expand its search partnership with Google, ad buyers said they were worried. Now, a new report appears to confirm some of their fears, as it predicts that Yahoo!'s search ad rates are set to surge.
Search ad technology specialist SearchIgnite, which claims to help its clients manage $350 million in paid search ads, said Yahoo!'s keyword ad prices should increase by an average of 22 percent, assuming the embattled Web giant attempts to maximize profits on the keywords it out sources to Google.
That would seem to be the idea, since when Yahoo! announced in June that it planned to handpick sets of search terms that it would use Google's search technology to sell ads alongside, the company said its motivation was to increase its ad performance for less popular, "long-tail" searches.
SearchIgnite's report finds that Google is generally able to charge higher rates for less common "tail" searches conducted on its platform compared to Google. Thus, if Yahoo! begins to use Google's technology -- and its pricing for these terms -- the effect will be to increase Yahoo!'s search costs across the board.
That may not be great news for buyers, many of whom expressed fear that Google's clout in the search ad business would approach that of a monopoly if Yahoo! eventually hands over the majority of its own search business to the company.
"The deal is clearly financially beneficial for both Yahoo! and Google; however, advertisers need to be aware of the potentially significant impact to their search marketing efforts," said SearchIgnite president Roger Barnette. "Most marketers will see their overall costs for search advertising across the Yahoo! network increase, and will need to adjust their search strategies accordingly."