You’ve heard me harp on about Rimm-Kaufman as being one of the most data-driven, transparent and thoughtful search agencies and today comes with yet more juicy data around the conversion rate by engines.
Rimm-Kaufmann’s clients tend to skew towards large online retailers.
Firstly, Google’s network (position along x-axis is ranked by traffic volume from most to least):
And Yahoo’s network:
There are a few investable nuggets of information because Google and Yahoo “take care of” the difference in traffic quality by discounting but that discounting does not go far enough and so some sources will see their search payouts decline over time as the agreements increasingly resemble reality.
The ‘we’ll handle the discounting’ approach by Google and Yahoo is a load of shit because of the incentives to charge more and secondly, even the mighty Google and Yahoo simply don’t know the depth of information needed (conversion rate, order value etc.)
Rimm-Kaufmann want the search networks to open up domain level bidding and that’s the reason for their post.
For investors, I’d be pretty down on Local.com (a public company) and there is certainly no love for AOL. Good luck to Rupert trying to re-sign Google at anywhere near $300m a year with data like this showing the horrible conversion rate on MySpace.
The other interesting trend is among comparison shopping networks, which tend to convert at a lower rate than normal search. It’s interesting because a lot of the comparison shopping sites have traditionally lived off arbitrage or being a ‘page 2′ search provider. The majority of their revenue is directly from merchants but in the past their deal with Google or Yahoo has accounted for 40% or so of their revenue, so it’s a huge slice. But comparison shopping sites have been murdered in recent times so it’s nothing really new in terms of information here.
The unknown is the gap between what Google/Yahoo discount and what they need to discount based upon conversion data.
