TrixiePixieGraphics / FakeNewspapers.com
is no longer a "Yahoo Store"
Yahoo! Shopping Network Pay Per Click (PPC / CPC)
Yahoo! Merchant Solutions Pay-Per-Click (PPC / CPC)
This site contains and includes our opinions
Should I Open a Yahoo Store?
Is Pay-Per-Click Advertising for You?
We routed our storefront through the Yahoo Shopping Network many years ago, but discontinued because of "philosophical differences" between ourselves and Yahoo! Shopping.
In 2002 Yahoo! modified some of the offending policies, and we were lured back.
One of the policies that turned us away years ago was Yahoo's steadfast refusal to supply us with any data whatsoever regarding the traffic on the Yahoo Shopping search engine. The prospect of increased traffic (and therefore increased sales) was a big factor in our decision to try Yahoo Stores in the first place. In trying to research whether or not it would be worth it to pay for a Yahoo Store and the resultant listing in the shopping searches, we wanted to know how many shoppers were perusing Yahoo's Shopping engine. Yahoo refused to tell us. Pointedly. Repeatedly. Steadfastly. They either refused to reply to repeated emails (and even registered snail-mail letters), or, when we finally pinned them down on the phone and asked them point-blank, over and over and over, the customer service rep wheedled out from under the question again and again, until we finally hung up. Our argument was that no business in its right mind would buy or lease into a store-front in a strip mall without first researching the traffic rates in the area. We argued with Yahoo that it was only fair for them to give us some idea how many shoppers were using their engine. Yahoo didn't see it that way.
This policy had not changed by the time we were ready to try Yahoo Shopping again. But by this time, several years later, we had our own traffic, and plenty of it. Still, we'll take all the sales we can get, and having our products listed in the Yahoo Shopping Network was one enticement to opening a new Yahoo Store. For many very small merchants, the prospect of having products listed in Yahoo Shopping is the single biggest reason to buy into a Yahoo store.
As you know if you have your own Yahoo Store, you pay (paid, up until 3-2004) Yahoo .5% on all sales that move through your store, and another 3.5% on all sales which originate from within the Yahoo Network. It always seemed a bit of a rip-off, but, heck, the amounts were low, and we simply didn't have the time or the energy to object. It also meant that Yahoo didn't get our loot unless it actually produced for us---a concept seemingly lost on most dot-commers these days.
We did enjoy a small increase in sales as a result of having our products listed in the Yahoo Shopping search engine. Yahoo Network sales accounted for about 4% of our total sales. That was fine with us, and it did increase over time.
In January of 2004 we, like all Yahoo Store "owners", received an email from Yahoo stating that we had a choice: we could:
(1) Do nothing, in which case our products---all of them---would be unceremoniously removed from the Yahoo Shopping Network, or:
(2) We could opt for Yahoo's new "Pay-Per-Click" (PPC or CPC) program.
Yahoo touted this new program as being "better" for the retailer. Why? No one is really sure. Suddenly, again, surprise, Yahoo was changing the rules.
Yahoo's "new and exciting" system works like this:
In order to keep your products listed in the Yahoo Network, you must now pay Yahoo anywhere from $.19 (nineteen cents) to a whopping, cow-choking $1.25 each time a prospective customer clicks on your product. Yahoo claims this will make the system "more fair". Yahoo says this is perfectly justified because it has so graciously dropped the 3.5% revenue sharing program. Well, is this a good deal? Let's take a look.
Take the example of one of our products, which is a middle-of-the-road seller, representative of all of our 500 or so items. Call it product number #123.
Product #123 has enjoyed 273 clicks which qualify for the Yahoo PPC fee. Those 273 clicks yielded one sale. Note that by Yahoo's own calculation, this product earns only $.15 per click. Remember, that's the gross income on this product---the net is $7.99, or about three tenths of one cent per click. Even if Yahoo charged us three tenths of one cent per click on this item, we would make exactly Z-E-R-O profit. Yet Yahoo will now be charging us at least $.19 / click, or even up to $1.25 per click, depending on Yahoo's whim when it categorizes our products. At the very least, the very least, Yahoo will collect from us the sum of $51.87 for a product which only grossed $39.95 and netted $7.99! How does Yahoo expect us to make any money under this system? Perhaps that small, insignificant, unimportant consideration never occurred to Yahoo Corporate.
If Yahoo chooses to place this product in a higher category (and it's entirely up to Yahoo), we would be expected to pay Yahoo as much as $341.25 for allowing us to sell $39.95 worth of product. Gross.
Hmmmmm.... This can't possibly be correct, can it? We must be missing something---
So we wrote to Yahoo to ask them, and here is their reply:
Your description is not correct........as merchant, you will receive 20% off whatever rate you are listed in.
Oh! Well! Okay then!
Don't we feel silly!
To sell $7.99 worth of product we'll only have to pay Yahoo, let's see--- either $273.00, or $41.49, depending on which category Yahoo graciously places our products in. Either way, obviously, we couldn't even break even.
So.....on each product, if everything works out as well as it possibly could, we'll only lose $41.49 per 30 days. As Lucille Ball on "I Love Lucy" said to Ethyl when Ethyl pointed out that they were losing a penny per cookie in their new cookie-making business, "That's OK, we'll make it up in volume."
The bottom line for us, and for, we suspect, many other retailers in the Yahoo Shopping Network, is this: We don't have a single product that can survive this kind of obnoxious advertising cost. Not one. Maybe a new car dealership can afford to spend $40 or $300 to obtain every sale, but many or most of Yahoo's other retailers cannot. It's not a gray area---it's virtually a complete and total sacking for Yahoo's retailers. Business researchers across the net are reporting that, according to their calculations, 75% of on-line businesses lose money on PPC programs. But how can these programs stay in business if that's the case? P.T. Barnum said it best: "There's a sucker born every minute."
But it gets worse! Not only does Yahoo expect us to begin paying out utterly insane click fees, it has announced that we now must compete with every other Internet business, even if they don't have a Yahoo store! No longer will the Yahoo Network search system show results only for Yahoo's merchants, it will show results for every retailer in the world who asks to be listed with Yahoo. Kind of like being listed in Google now, isn't it? Except that Google is free.
We watched Yahoo's "telecast" regarding this issue on 1-28-04. We submitted a hard question---Yahoo didn't reply. But they did air several hard questions from other store owners, and we were amazed, astounded and embarrassed to watch as Yahoo did the "little dance of deceit" in skirting the questions without actually answering them.
What's the bottom line for us and, we suspect, most Yahoo retailers? For us, it's simple:
We may continue to use our Yahoo store simply as a means of processing credit cards. Or we may not. We can't see any means of making money using Yahoo's "new and exciting" PPC system. Yahoo Stores has reduced itself to a shopping cart service---nothing more than that.
Here's a graph showing what happened to our Yahoo-Store-generated traffic after Yahoo instituted its "exciting new program". Note the drastic drop near the right---that corresponds with the beginning of Yahoo's "exciting new Pay-Per-Click" program. The hump near the right edge reflects a hefty advertising campaign we initiated to try and stave off the decline. Our gross (gross) revenue has dropped by nearly $1000/mo., and our advertising costs are up ten times. The second, larger graph below shows the trend approx two months after the first graph was snapped.
How low can it go?