Last week, Yahoo! introduced quality-based pricing (QBP) to its new PPC advertising program Panama.
Yahoo! Search Marketing advertisers were used to be charged the same for clicks for all traffic partners / websites of Yahoo!. With quality-based pricing, advertisers may be charged less for some clicks based on the quality of the clicks.
We’ll evaluate the quality of traffic from our distribution partners’ sites. Your click charges can be discounted based on the value of that traffic. Discounts will automatically be applied to your account. “Quality” is calculated based on conversion rates and other measurements of the ability to deliver more interested and valuable customers to you from particular distribution partner sites.
As advertisers are getting discounts, obviously certain publishers on Yahoo! Publisher Network that have been sending lower-quality clicks will have their profit margins reduced. With this move I believe Yahoo! is making efforts in encouraging its advertisers to spend more on its content network, in which the traffic quality is still much lower than its search network. Interestingly though, Yahoo! insisted that the new quality-based pricing mechanism will affect both the Search and Content Networks.
Back in 2004, a similar pricing mechanism called smart-pricing was introduced on Google’s Adwords (advertising program) and Adsense (ad publishing program), allowing advertisers to pay less on lower-quality clicks. Since then, there have been many instances that Google tried to combat search arbitrage (or Adsense-made websites).