Terra Lycos is set to enter the paid placement game alongside players such as Overture and Google, when the company opens its "InSite AdBuyer" program to advertisers in the coming weeks.
The program will allow advertisers to purchase guaranteed placement on a cost-per-click basis, with ads distributed on the Lycos and HotBot search engines, which are owned by Terra Lycos. Ads will also appear on AllTheWeb.com, a search engine operated by FAST. The company has a close partnership with Terra Lycos already, providing crawler-based editorial results to the Lycos web site.
Of course, advertisers can already purchase their way onto Lycos and HotBot, given the existing partnership that Terra Lycos has with Overture. So what's the value in this new product and why is Lycos seemingly trying to simultaneously compete with and partner with Overture?
The Overture partnership, which runs through November 2003, is not being eliminated. At both Lycos and HotBot, the "Sponsored Search Listings" section of results will continue to show the top three paid listings from Overture for whatever was searched for. The same is true for AllTheWeb.com. Instead, the AdBuyer program will fill new paid placement spots to the right of the search results page.
An example of what's to come can already be seen at Lycos and HotBot. Both now have up to three new Google-like ad boxes appearing on the right side of the screen (paid disclaimers are to be added soon). Currently, these are filled by those who occupy positions four through six in Overture's paid listings. However, when the AdBuyer program launches in a few weeks, the boxes will be devoted solely to AdBuyer listings.
Terra Lycos hopes that by running its own program, the company will be able to strengthen financial relationships already established with those who purchase inclusion into its editorial results, as well as attract new search engine marketers into its fold. That client base is deemed essential to Terra Lycos's long-term success.
"As a company, I don't want to only be a distributor for other people's content. That's not the only business model I want to have. I will distribute Overture listings to my customers, because they do a wonderful job, but at the same time, I would like to have relationships with some advertisers directly," said Tom Wilde, general manager of search services for Terra Lycos.
In particular, Terra Lycos sees running the new "sidebar" paid listings program as a chance to get the best of both worlds. Overture gets to continue powering the "inline" results that pull high clickthrough and thus command high prices, while the sidebar program may be attractive to advertisers looking for a prominent presence at a cheaper price.
"From a real estate perspective, the [inline” paid placement listings are such a high value spot that Overture is the best provider for that. They are my long term partner. This simply enables us to have a well rounded business model and establish a relationships with these advertisers. Those things may be symbiotic forever," Wilde said.
While clickthrough for paid listings can vary widely based on the search term targeted, ad copy and ad position, Wilde said the traditional inline results that Overture powers at Lycos and HotBot have a roughly 6 to 10 percent clickthrough rate.
In contrast, the rate for the sidebar ads is roughly 2 to 3 percent. However, even though the sidebar ads may pull fewer visitors, the conversion may be the same. Wilde hopes that reduced competition for the sidebars, due to the lower clickthrough rate, will make them an option for advertisers feeling that Overture is too expensive for them.
"AdBuyer is likely to be for those who feel they've been priced out of the Overture inventory," Wilde said.
Wilde readily admits that Overture is probably not pleased with the Terra Lycos program. "I think they'd prefer that we didn't do it," he said. Even less pleasing to Overture will probably be the technology Terra Lycos is using. Rather than creating its own system, Terra Lycos is turning to Overture-rival FindWhat.com to provide toolsets for the AdBuyer program.
As far as Overture is concerned, it has a patent covering technology to produce cost-per-click, bid-for-placement search listings -- and it is trying to enforce that patent through a current lawsuit against FindWhat. So not only has Lycos now hooked up with an Overture rival, but it's also using a paid placement model that Overture claims as its own. Couldn't that ironically lead to Overture suing one of its major partners, Terra Lycos?
"We did talk about it quite a bit, but since we are just licensing the technology on an ASP [application service provider” basis, we are relying on FindWhat to ensure they have clear rights to the technology," Wilde said. "We view that as their discussion with Overture, and that will work out as it does."
And if it doesn't work out?
"If they lost that lawsuit, wed have to change," Wilde said.
Those who've been watching the Yahoo-Overture-Google story over the past few months will recall that when Overture signed Yahoo, it scored a coup in being named the exclusive paid listing provider. Was Terra Lycos somehow exempted from granting similar exclusivity to Overture? Nope, but such exclusivity only applies to third-party providers.
"Basically, Lycos can deploy any type of advertising vehicle for Lycos advertisers," Wilde said. "Overture is our exclusive provider of third party paid search results, but InSite AdBuyer is for Lycos advertisers."
Does this mean Google might find a backdoor into Yahoo? Perhaps, but it would be difficult. Google could license its technology in the way that FindWhat has done to Lycos. There might be value to both parties in that, though the gem of distributing its ads on Yahoo would still be lost.
And what would that lost value be? Typically Overture partners tend to get around 60 percent of revenues earned from the ads they carry. In the case of Terra Lycos and FindWhat, Terra Lycos won't say what the exact split will be but did confirm that the percentage is more than it gets from Overture -- justified in that it is doing the "heavy lifting" in terms of marketing.
However, Terra Lycos was also quick to qualify that in terms of gross revenue, it will make more from Overture, at least in the short term.
"Click rates are lower, volume is lower [for AdBuyer”, but time will tell," Wilde said.
While Terra Lycos will be using FindWhat's technology, it won't be carrying FindWhat's listings. Instead, Terra Lycos will have its own independent set of paid listings, which will be shown only on the AdBuyer network of sites: Lycos, HotBot and AllTheWeb.com.
As with Overture, you'll bid for higher placement in the results, when the program opens to sign-ups around August 30. There will $0.05 minimum bid requirement, a $50 opening deposit and no monthly minimum charge amount that must be met. Listings will be subject to editorial review, a process that will be handled by FindWhat's staff.
Unlike Overture, there will be no automated bidding. There will be a "max bid" option similar to that at FindWhat, where you can push your bids up on a one-time basis. There's no policy yet in place about third-party bid management tools, but Terra Lycos is showing every sign of being receptive to them, if only for the fact that without the tools, there's a real possibility of duplicating bids.
For example, if you are running ads for the same terms on Overture and in the new AdBuyer program, it could be that your paid listing will show up twice on the results pages at Lycos, HotBot or AllTheWeb.com. Some advertisers may not mind this -- double-exposure, and you only pay for the click you get. Of course, you could also get each ad clicked on by the same person and so be charged twice.
You might also want to appear in only one spot -- inline or sidebar -- but not have the ability to easily control this. A third party bid management tool might be your solution, and that's one reason why Terra Lycos is now talking with various vendors in the market.
While the program is set to open to advertisers around August 30, ads themselves aren't likely to appear until mid-September, at the earliest. Terra Lycos wants a "critical mass" of advertisers and expects to go live with ads when it has a "fill rate" of about 20 percent. That means for all the search results pages it shows, about 20 percent will carry paid listings. In contrast, Terra Lycos estimates Overture, FindWhat and Google are all around the 40 percent fill range.
A decision hasn't yet been made on whether to "backfill" any open sidebar boxes with Overture results. In other words, if only one AdBuyer spot is sold, Terra Lycos could potentially fill the other two boxes with Overture listings. The company isn't currently leaning toward doing this, for fear of causing unexpected ad duplications.
Lycos does expect to have cross-promotion with FindWhat, so that anyone already advertising on FindWhat can easily migrate their listings to populate a separate account with Terra Lycos. Once done, however, you'd have to manage the accounts separately.
In other things to watch for, the program when launched will feature its own keyword research tool, giving access to data from searches on Lycos and HotBot. In addition, later this year Lycos hopes to enhance the tool so that it can automatically examine a web page and suggest terms to bid on based on the page's content.
How about distribution beyond Lycos, HotBot and AllTheWeb? It could happen, but that's not the current goal.
"This enables us to have a nice balanced business model," Wilde said. "That's really going to be our focus."
Also, HotBot's been long overdue for an update, and that's now scheduled for November.
"We're currently doing a complete overhaul of the product. It's needed; it's gotten stale. We've got some cool features coming," Wilde said.
Here you will find information about all Lycos InSite programs -- the existing paid inclusion programs and a link to the new InSite AdBuyer area, where you can preregister for information.
How Lycos Works
Guide for Search Engine Watch members to getting listed with Lycos.
Lycos Start Here Text Links
These long-standing CPM-based paid listings sold by Terra Lycos and which appear below Overture listings will continue to be offered. Pricing is between $35 to $60 CPM (or per thousand impressions).
Search Engines & Legal Issues
Background on the Overture-FindWhat-Google lawsuits over paid listings patents can be found here.
Overture Wins Yahoo, What Will Happen With Google?
The Search Engine Report, May 6, 2002
Background on the recent Overture deal to lockup paid listings on Yahoo.
SEO Toolbox: Bidding Managers
A variety of bid management tools are listed here.
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