GroupM: Search Prices to Spike

Search advertisers should expect inflated prices for a short period as Microsoft begins integrating Yahoo Search onto its own search platform, according to an analysis conducted by GroupM Search.

Microsoft has promised to complete the transition by the end of October, at which point Bing should power all of Yahoo’s search queries. In the coming weeks, advertisers should brace for cost-per-click (CPC) increases of up to 78 percent above current Bing costs for top branded keywords.

Similarly for nonbranded keywords, GroupM anticipates premiums of 64 percent for at least the first three weeks of the transition. Prices should net out around 23 percent and 13 percent higher than current Bing CPCs respectively, per the analysis.

GroupM Search is basing its price volatility prediction on recent search history; the company’s Predictive Insights group looked back on Yahoo’s 2007 introduction of its Project Panama search platform, as well as Microsoft’s 2009 launch of Bing for reference.

In this case, the fact that Microsoft and Yahoo have different bases of advertisers should only add to the price fluctuations. According to GroupM Search CEO Chris Copeland, a brand that is used to bidding on keywords against a set group of competitors may suddenly face much steeper competition, which could inflate pricing.

“When you bid in an auction every day, you become immune to how many other brands are bidding against you,” he said. “But we’ve found that there are a significant number of advertisers that are just Yahoo advertisers or just Bing advertisers.”

The key to navigating the transition period, according to Copeland, is preparation. His agency has already advised several brands that were not already buying keyword ads on Bing to start doing so before the transition, to ease friction. Plus, some brands may be better off temporarily narrowing their keyword lists until prices stabilize. “At some point, there will be a ‘new normal’ for Bing prices,” said Copeland—probably after the holiday shopping season.