Monopoly money

New data from SearchIgnite finds that the Google/Yahoo sponsored search deal will increase Yahoo search rates by about 22 percent.

SearchIgnite analyzed six months of data across 15,000 clicked-upon keywords and phrases, as well as the average cost-per-click advertisers paid on Google and Yahoo.

Yahoo has higher keyword ad rates than Google for certain terms, including the first three results on searches for premium terms like "insurance." It also outdoes Google in the #1 result for keywords containing a brand name, with results for positions #2 and #3 roughly the same:

But Google fares better for the vast majority: longtail and more specialized searches, as well as for less prized keywords.

The Yahoo/Google liaison will enable one or the other company to dominate a search term, depending on which performs better on Yahoo Search. SearchIgnite's "Potential Impact of a Google-Yahoo Partnership & Cost to Marketers" (pdf) report posits Yahoo will continue to sell the premium terms where it performs best. Google's paid search platform will likely cover longtail terms — but Yahoo is expected to make significant gains if it also surrenders commonly searched-for terms to Google, particularly for ads that appear below the fourth position in sponsored search.

More findings:

• Cost-per-click on Yahoo tended to be 5-16 percent higher, mainly for ads in the top three positions.
• For branded terms, advertisers paid 38 percent more for a top spot on Yahoo, versus on Google. After Position 3, brand terms became more costly on Google.
• For longtail keywords, the price difference between bid rates on Yahoo and Google increases as the ad's page rank decreases. It would thus prove economically advantageous for Yahoo to outsource longtail terms to Google.

SearchIgnite points out that Yahoo indicated the Google partnership would primarily affect longtail terms.

"This deal doesn't do anything to enhance the competitive landscape," said founder Roger Barnette of SearchIgnite to MediaPost. "It doesn't give advertisers more options, and to an extent it gives them less. I think we'll need to wait and see.

"But broadly, advertisers are concerned about whether it will cause price inflation on Yahoo. Any inflationary pressure on one of their primary vendors causes concern."

A recent report found advertisers are nervous about the Google/Yahoo deal and even perceive it to be the end of Yahoo's Panama platform.

Yahoo, which claimed the deal would net between $250 to $450 million in cashflow over its first year, will be under a great deal of shareholder pressure to keep that promise. Given its current troubles with Microsoft and Carl Icahn, which wish to oust its board, shareholders may push for more outsourcing if profits fail to materialize.

"At this point, shareholders don't believe that Yahoo can do anything well," lamented senior analyst Ross Sandler of global Internet and media at RBC Capital Markets.

AT&T was the most recent high-profile company to speak out against the Google/Yahoo search ad partnership.

Charts from the study:

For search terms with brand names

For longtail search terms

For commonly searched terms

* Percentages represent the average cost per click difference between the given terms running in the above positions on Google and Yahoo.