Aaron Wall has an excellent explanation of why a click costs so much more on Google on average than a click for the exact same term on Yahoo. As he explains, it really comes down to the quality of the syndication partners Yahoo has partnered up with to display ads:
Put another way, a Yahoo! click for mortgage is worth the same $15 that it costs on Google, but it goes for less than $5 because Yahoo! forces advertisers to eat junk traffic too. If Yahoo! virtually killed off their syndication partnerships (at least all but the cleanest ones) their short term revenue might decrease, but their click values & click prices would sharply increase.
A common misperception is that a click for a given term should be nearly equal across all search sites. If someone is looking for a mortgage, is shouldn’t make much difference whether they happen to start their mortgage searches by typing the term into Google or Yahoo’s search box. And this is true for the most part, outside of some demographic differences between search sites.
What’s killing Yahoo’s cost per click is their syndication partners. An ad placed into Yahoo’s search marketing program appears not only on Yahoo (where you’d expect it to) but also on over 1000 additional sites through syndication relationships Yahoo has built over time. Yahoo splits the value of each click with the syndication partners. Unfortunately, traffic from syndication partners – on average – performs worse than traffic on Yahoo itself. How much worse? Enough to make the value of a click on Yahoo 1/3 of what it might be on Google for the same term.
Is this good or bad? Well, neither, from my perspective. The real-time fluid market that is PPC advertising has managed to determine the market value for terms based on historical conversion rates.
As Wall points out, Yahoo could fix this by giving advertisers more control over where their ads are shown, and for how much. Surely, advertisers would be willing to pay more per click when ads are shown just on Yahoo’s own search property. And Yahoo takes home a larger percentage of the revenue generated from those clicks, so it would be a big win for them. Advertisers would likely continue serving ads to Yahoo’s syndication partners, but at a more reasonable rate than they’re forced to pay now.
Beyond Google and Yahoo, there are quite a few more pay per click advertising networks you could try. It’s quite common to see advertisers see some success with one of the big players, then look elsewhere to see if they can find even more PPC traffic – and possibly some at lower costs per click than what they’re paying with the top-tier PPC sites. Unfortunately, problems with quality become more and more rampant as you move down through the tiers, so don’t get your hopes up too high. Just be sure to have a decent analytics plan in place before throwing money into this type of advertising.