A lot of people are up in arms this week about Yahoo’s change in terms and conditions to YSM accounts that gives them the right to “(i) create ads, (ii) add and/or remove keywords, and/or (iii) optimize your account(s).” In other words, YSM can dive into your account at any time and add stuff as they see fit. That’s analogous to Comcast deciding that I should subscribe to HBO or Wells Fargo taking my money out of checking and putting it into a CD. Anyway you slice it, this is a desperate and customer un-friendly move by YSM.

Of course, Google’s been effectively doing the same thing for a few months now, just in a much less blatant way. Google’s “automated matching” “shows your ads on relevant search queries not already captured by your keywords.” The definition of relevant – whatever Google says it is. I suspect that if I was selling bedroom nightstands Google would match me on “one night stand” – that sounds relevant doesn’t it?

One of my AdWords accounts got a funny message related to Automated Matching this morning. Here’s the screenshot:

In case the image is too small, the headline proudly proclaims “New! You’ve been selected to try automatic matching.” Wow, it makes it sound like I’ve won a prize, or that I’m one of the few accounts that Google is giving special treatment too! I think this is just as crass a money-grab as the Yahoo terms and conditions amendment; it’s one thing to add a feature that makes you money, but quite another to describe it in a way that makes it sound like an advertiser benefit.

Ultimately both of these changes reflect a movement that I’ve been observing for a long time (well, since at least 2006) – the keyword is slowly dying. YSM has never recognized the difference between singular and plural terms and Google now claims that multi-token keywords by definition merit low Quality Score. Add to this Automatic Matching, the ever growing broad match algorithm and now YSM editorial ‘help’, and I think it is just a matter of time until we are just bidding for categories instead of keywords.

Think about such a scenario – instead of buying 200,000 keywords, you simply choose five or ten categories, like “mortgage – refinancing”, “mortgage – new home”, and “mortgage – bad credit.” Google and YSM match you on any related queries (in their esteemed opinion) and – best of all for the search engines – the bidding auctions are reduced from hundreds of thousands of inefficient mini-auctions to one giant auction per category. Can you imagine what the top position would cost if all mortgage advertisers were confined to five or 10 auctions? The CPC benefit to Google would be enormous.

Of course, from an advertiser perspective this would be a disaster for most. 99% of the advertisers on the search engines would basically be pushed out of SEM entirely overnight. SEM technology companies would be rendered virtually obsolete. Consultants like myself would be out on the street. But from a revenue optimization perspective, this would probably be a win for the search engines.

If you don’t believe such a system is possible, consider some of the alternatives to AdSense currently available. Sites like AdKnowledge, Quigo, and IndustryBrains are all category-based. They have fewer advertisers, but they have all been quite successful and profitable.

The flip side to all of this, though, is that category-based advertising is bad for both advertisers and consumers. For advertisers, the inability to bid on keywords decreases accuracy and ROI and effectively punishes hard-working and sophisticated marketers. For consumers, extended broad match and category-based auctions diminish the relevancy of the ads that they are seeing. Over time, a system that benefits search engines at the expense of both consumers and advertisers could backfire badly. Indeed, the banner-filled pre-Google days of AltaVista, Excite and Yahoo – which resulted in a poor search experience for consumers and expensive inefficient advertising for advertisers – were the very environment that fueled Google’s incredible growth.

In other words, Yahoo’s ‘invisible hand’ and Google’s ‘invisible algorithm’ might drive short-term revenue growth, but they might ultimately be a long-term disaster (as Yahoo has already experienced once before vis-a-vis Google’s rise). For now, however, we advertisers must grin and bare it and hope that history does not repeat itself.

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David Rodnitzky
David Rodnitzky is founder and CEO of 3Q Digital (formerly PPC Associates), a position he has held since the Company's inception in 2008. Prior to 3Q Digital, he held senior marketing roles at several Internet companies, including Rentals.com (2000-2001), FindLaw (2001-2004), Adteractive (2004-2006), and Mercantila (2007-2008). David currently serves on advisory boards for several companies, including Marin Software, MediaBoost, Mediacause, and a stealth travel start-up. David is a regular speaker at major digital marketing conferences and has contributed to numerous influential publications, including Venture Capital Journal, CNN Radio, Newsweek, Advertising Age, and NPR's Marketplace. David has a B.A. with honors from the University of Chicago and a J.D. with honors from the University of Iowa. In his spare time, David enjoys salmon fishing, hiking, spending time with his family, and watching the Iowa Hawkeyes, not necessarily in that order.