Maybe you can teach an old paid-search dog some new paid-search tricks. In this case, it's Yahoo! (NASDAQ:YHOO), which has been following Google (NASDAQ:GOOG) around like a puppy lately. This time, it's copying Google in grading the quality of traffic that third-party publishers are delivering.
"Quality-based pricing will give us the ability to price traffic commensurate with the value that advertisers receive from each traffic source," reads the bulletin that went out last night to participants in the Yahoo! Publisher Network.
In short, it's the same "smart pricing" technique that Google has been using in its Google AdSense program for three years now. If a website is delivering poorly in converting traffic to its advertisers -- and by that I don't mean clickthrough volume, but the actual success of the generated lead -- publishers will be paid less, just as advertisers will be charged less.
Smart pricing, and now quality-based pricing, are ways to help eradicate click-fraud fears. As good as Google and Yahoo! claim to be in nipping bogus clicks in the bud, it is more effective to advertisers to see tangible price breaks when leads prove fruitless.
Yahoo! has been aping Google since it launched its Panama contextual marketing platform a few months ago. Like Google, Yahoo! will now give priority to ads based on their overall value rather than the actual bid. For example, if an advertiser is willing to pay $0.10 for an ad, and it gets clicked on twice as often per impression as a $0.20 ad does, the $0.10 ad will be featured more prominently.
Between that and the new "quality-based pricing" initiative, it's going to be hard to tell Google and Yahoo! apart. We can hope that other companies with grander paid-search ambitions, such as Microsoft (NASDAQ:MSFT) and IAC/InterActiveCorp (NASDAQ:IACI), are taking notes.
The problem here is that once Yahoo! becomes a clone of Google -- at least in terms of its paid-search program -- the emperor will have no clothes. What if the problem is really all about the lack of ad inventory on Yahoo! or its inferior ability to target ads?
Yahoo! can't walk a mile in Google's shoes if its feet are too small.
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Longtime Fool contributor Rick Munarriz is a huge fan of Yahoo!, but he doesn't want to see it naked. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
