Yahoo this week changed the way it will set minimum bids on some keywords in Sponsored Search ads in the U.S., bringing it closer in line with Google's policy. Instead of setting all minimum bids at $0.10, Yahoo will now allow the market to set a variable minimum bid. That means that in some cases, the minimum will be above $0.10, and in other cases it could be lower.
The minimum bids will be set based on the relevance of ads to a keyword, the number of bidders and their bid amounts. It will not be based on advertiser conversions. These kinds of factors are already used by Yahoo to rank ads based on a quality score, but the difference now applies to the minimum bid, or reserve price.
A key difference between Yahoo's new method and Google's is the institution of alerts and a grace period when the bid on a given keyword is about to fall below the minimum. Yahoo will notify advertisers in their Account Dashboard if a bid is about to drop below the minimum, and will offer a grace period of up to a few days to allow the advertiser to raise their bid to keep the keyword active.
The first batch of keywords goes live in the U.S. with the new reserve pricing model over the next few weeks, with more keywords to be added internationally in the future.