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In the previous two articles on quality I explored the notion only accepting high quality traffic is actually a bad strategy. Pushed to its logical conclusion Yahoo or Google would only accept traffic that converted 100% of the time.
The problem is that 100% converting traffic is extremely rare and it would mean that Google and Yahoo would have negligible revenue. When you look at G&Y's business model they are in the game to consume clicks and to consume them as fast as possible in ever increasing quantities.
This means that Google and Yahoo are in an interesting balancing act. They need to have sub-standard (ie. non-100% converting) traffic but not too low converting that advertisers begin to leave.
Given this the case it means that for every keyword in every industry segment there is an advertising quality conversion floor which if went below advertisers would leave. The G&Y keyword auction system means that the cost per click (CPC) value for a keyword is actually the price of the quality floor.
Here is the interesting part to the whole process. There are times when the average quality of the traffic is higher than the quality floor. This means that there is potentially a vast quantity of clicks which are acceptable both above and below the floor. As long as the average conversion rate is maintained above the quality floor both G&Y are incentivized to drive greater volumes of clicks to the advertisers.
The challenge for parking companies is to determine the shape of the quality curve for each keyword for a dynamically changing group of domains. The proposition should be that as domains are added to a keyword the traffic will influence the quality curve therefore enabling the parking company to plot the chart. This is not a trivial exercise but the benefits of doing this can be enormous.
For example, the following three graphs depict different shaped quality curves and indicate the potential "green" upside of clicks that should be accessible. These volumes are potentially enormous! It's times like this that I wished that I was working for a parking company on a performance basis!
The other aspect that needs to be considered is the fact that traffic is typically pooled together with a single quality index applied to the whole pool. I am aware that Google often provides parking companies with multiple feeds so that a parking company can split out groups of domains for traffic analysis. The challenge comes when these domains are placed back into the pool of all other domains as the pool index value would impact these domains.
There is a trade-off between quality and clicks which directly impact all of our revenue lines. In the next and final installment on "Quality" and want to try and unpack how Google and Yahoo's variations of "smart pricing" affects the revenue line of our portfolios at parking companies.
Forum Topic : Traffic quality
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