From the Yahoo Search Marketing Blog:
Yahoo! Search Marketing is rolling out a new feature that we think will help enhance the quality, potentially reduce the cost and increase the value of traffic to you, our advertisers. It’s called quality-based pricing, and it measures the quality of traffic coming from our distribution partners—that is, the web publishers large and small that display your ads.
Previously, you were charged the same for traffic from all web sites within our distribution network. Now, with quality-based pricing, you may be charged less for certain clicks than you otherwise would pay, depending on the overall quality of the traffic provided by our distribution partners. As a result, your click charges can decrease.
“Quality” is calculated based on conversion rates and other measurements of the ability of our partners’ sites to deliver more interested, valuable customers to you.
Welcome to the world of managing publisher expectations and naunce, Yahoo. This will be interesting…
This is a fascinating program. So, Yahoo is going to figure out whether the traffic coming from a given website to yours is likely to convert, and based on that likelihood, adjust the price of clicks on ads on that website. Fair summary?
If nothing else, this seems like a good way to deal with click fraud, and entice advertisers to continue (or to start) advertising on sites outside of Y! Search.
For the record, my own company stopped advertising (via AdSense or Overture) on non-search websites a long time ago, since the conversion rate was so low.
Its such a tricky balance keeping both publishers and advertisers happy; One wants high click prices that other doesn’t but if this is rushed out YPN volumes and quality could go down rather than up.