GoTo.com has bumped up its minimum bid price for search engine
listings by five times, miffing some small-business Web sites that had
banked on the lower fees.
The Internet search service, which displays results on a pay-for-placement
basis, changed its minimum bid rates from 1 cent to 5 cents for new
listings, effective March 1. Businesses bid for placement in the company's
search engine--based on desired keywords such as "online gambling"--and
listings can cost as much as several dollars for every time a Web surfer
clicks on the link.
Kyle Yamnitz, founder of EdScope,
said the rate hike could cost additional hundreds of dollars each month to
advertise his company, which develops educational Web sites. He said he
currently pays roughly $225 per month for the keyword "lesson plans" but
will likely have to pay about $1,125 at the higher rate based on the
average number of times visitors "click through" to his site.
"This move really hurts the small businesses on the Internet like myself
who run high-quality resources but cannot afford to pay 5 cents per click,"
The highest-priced listing for the search term "domain hosting" costs the
advertiser $3.51--a cost range that's only shared with four other
advertisers for this keyword. Roughly 50 advertisers pay for the
lowest-priced placements in the 1-cent to 2-cent range.
The move comes as the company wins major portal deals with such online
forces as Walt Disney's Go.com, AOL Time Warner's America Online and
Terra Lycos. This week, the company quietly debuted as the default search
service for a newly resuscitated Go.com.
The price hike also underscores the pressure Net companies are under to
bolster profits. Slowing ad sales and shrinking ad rates have caused many
major Internet companies, such as Yahoo, to revise earnings estimates and
seek alternative means for improving the bottom line.
"We've recently signed a number of big traffic deals, and these deals have
increased our costs," said Jaynie Studenmund, chief operating officer for
GoTo.com, who added that this is the company's first price increase since
its founding in 1997. "We plan to continue to offer our
advertisers the best source of targeted traffic on the Web."
For existing advertisers such as Yamnitz, their terms are grandfathered, or carried over,
until Sept. 1. But if he needs to make an adjustment to a bid for an
existing keyword, he must jump to the 5-cent minimum.
GoTo.com, which has a total of 37,000 advertisers and 7 million paid search
listings, also increased the minimum amount the advertiser must spend with
the company to $20.
"Most of our advertisers spend over $20 a month, but if you spend less
there's now a service fee for the difference," a company representative said.
FindWhat.com, which also runs a pay-for-listing search service, said it has
no plans to raise its minimum bids. The company, which offers about 2
million listings, has licensing deals with InfoSpace services Metacrawler
In contrast, Google, a relative newcomer among search services, lets
advertisers buy only text-based ad space, not search listings. The company
said that its "Adwords"--a do-it-yourself ad placement service--appeals to
small-time advertisers because it's based on a fixed cost of about $10 to
$12 per every thousand people who see the ad. Google said viewers click on
such ads about 2 percent of the time, much higher than the industry
standard for banner ads.
Yamnitz said he may turn to such services after Sept. 1, the deadline for
GoTo.com's grandfather clause. "This move likewise decreases the value of
GoTo.com's search engine. The only listings will be from the larger
companies with deeper pockets, yet not necessarily better sites, and fewer