Yahoo and Microsoft Search Advertisers May See Rate Hike of Up To 78%

Online advertisers may see as much as a 78% price increase in paid-search rates once the search alliance between Yahoo (YHOO) and Microsoft (MSFT) is wrapped up, according to a report released Monday by research group GroupM Search.

Cost-per-click is expected to rise dramatically as advertisers shift from using both the Yahoo and Microsoft Bing search platforms to using Microsoft's alone, creating a potential supply-and-demand imbalance in the keyword advertising market. Yahoo's paid-search advertising transition to Microsoft's Bing is expected to be completed as early as next month.

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"The industry has long known the variances of performance between Yahoo and Bing. What we found and what we believe has the biggest material impact for advertisers are the vastly different competitive sets between the two," said Chris Copeland, CEO of GroupM, in a statement. "When you put such a large set of new advertisers of varying sophistication into the mix, you are going to see a less stable CPC [cost-per-click] marketplace."

Following the transition to Microsoft's Bing for all paid-search ads, advertisers are likely to see a three-week period of pricing volatility, GroupM projects. During that time, GroupM expects average prices hikes of 64% for unbranded keywords and 78% for branded keywords. After the market settles, however, the research firm expects Bing's paid-search advertising rates to remain 13% to 23% higher than their levels prior to the transition.