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Engine-Side Conversion Tracking: A Bad Idea?

We expressed concerns about sharing conversion data with the search engines months ago and it seems that our fears have been realized.

According to a thread started by "redzone" at Webmaster World, Shopping.com will be increasing their CPC rate card across certain categories as of February 1. Some of the more substantial rate increases include:

  • Electronics -> Flat Panel TV's - $.40 to $1.00
  • Health & Beauty -> All SubCat's - $.15 to $.50
  • Home & Garden -> Small Appliances - $.30 to $.50
  • Jewelry -> Watches - $.40 to $1.00
  • Kids & Family -> Strollers, Car Seats, Cribs & Carriers - $.30 to $.75
  • Office - MultiMedia Projectors - $.40 to $1.00

Redzone (rightly) speculates that the increases stem from the fact that Shopping.com’s "free" conversion tracker has provided insight into the real value of their inventory. Apparently, the categories noted above (and several others) are performing so well that Shopping.com can afford to substantially raise their rates (thereby increasing their revenues), while simultaneously continuing to provide profitable traffic to their advertisers. Bizrate followed Shopping.com’s announcement with rate increases of their own.

Think this trend is limited to the Shopping engines? Think again. Let’s not forget that it was only two years ago that Google stopped setting a "floor" on CPC’s for the top-performing AdWords categories (e.g. the minimum CPC for "flowers" was ~$.40).

While Google may not start that up again anytime soon, the fact that they're collecting (and potentially learning) from conversion data right now shouldn’t be overlooked.

Giving the search engines visibility into the effectiveness of keyword buys could potentially allow them to consciously inflate their rates – Google and Overture will recommend a company's most successful words to their competitor, setting off small bidding wars. Once the price of these keywords starts to increase, their effectiveness will almost inevitably decline.

Wake up, people.

Posted by RM at January 14, 2005 01:33 PM

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