Maximum clicks at an optimal price: reorganizing auctions in Yandex.Direct

By the end of August, Yandex.Direct is expecting some important changes: the current "second price" auction format will be replaced with the VCG auction format, and the approach to the sorting of ads in ad blocks on search will be changed. At the same time Yandex will be abolishing the system of cumulative discounts in Yandex.Direct.

These future changes will allow Yandex to present advertisers with more opportunities for growth from ad placement.

Yandex wants to inform you in advance how the system will work to help you get the maximum benefit from the advantages of the new model from the moment it launches.

1. Switching to a new auction system

Initially, auctions in Direct were set so that for each click, the advertiser is not paying for the whole bid, but for the bid of the participant behind them plus the bid increment. This model has many advantages, but has its own peculiarities: in that for advertisers who evaluate ad effectiveness on the return of traffic, placing first in an ad block is often not as favorable as being placed at the bottom.

Let's look at a simple example of why this is happening.

For example, the price for third position in a premium placement block is 5 rubles, while second place is 10 rubles. In this case the conditional difference in the traffic with these two positions is 15%. According to the logic of the current auction system for each click in the second position, the advertiser will pay twice what you would have paid on the third. In terms of clicks the advertiser will receive approximately 1/7th more in comparison with what they would have received had they remained at the bottom.

Unlike the current auction system, where an increase in CPC is associated with an increasing position, in the new VCG auction system the CPC grows directly with the growth of traffic. It is generated on the basis that an advertiser in a higher position is conditionally only paying more for extra clicks for that position. Thus, advertisers will be able to get the maximum number of clicks at any position for an optimal price.

In the interface you will still be able to see the bids required for position entry, and set the bid you're willing to pay. The system will begin to show more relevant information and charge the price for each position at that moment, so you'll have more transparent price points for setting bids.

2. Changes in the approach to ranking

With the transition to the new auction system, Yandex will make corrections to the ranking of ads on search. Ads will be sorted in blocks and selected on the same indicators — through a combination of CTR, bids, and the quality coefficient. This means that in the new auction system, ads will be better and more attractive for users and they will get more benefits.

To calculate the quality of advertising Yandex will also use relevance factors, which are already used in Yandex.Search. This allows Yandex to increase the traffic quality for advertisers and the relevance of a page of search results, as well as increase the quality of advertising.

3. Abolishing discounts

Discounts in Yandex.Direct influence the CPC. It allows advertisers that are focused on purchasing large volumes of traffic to buy more clicks due to savings on the cost of each of them. In the new auction system, traffic from higher positions in ad blocks in many cases will become cheaper in comparison to their price in the old auction system, so future changes to auctions will not only make ad placement more profitable for advertisers, but will also help to compensate for the difference in click cost for those who already have a discount.

What will change in campaign management and how to prepare for it

In the next month no changes will occur in the system. The restructuring of the auction system will happen at the end of August — simultaneously for all Yandex.Direct advertisers — and it will not affect your current campaign settings, or the efficiency of automatic strategies in Yandex.Direct.

More useful data will appear in the Yandex.Direct interface, Direct Commander, and the API, such as the actual size of bids that can be charged currently and prices for more positions.

The overall logic of how external automation tools function will not change, but you will need to get additional data for more effective planning of bidding strategies in the new auction system. Detailed instructions will be published today in the documentation for the API.

Closer to launch, Yandex will be examining the differences between the versions of the auction systems through illustrative examples, and answer all your questions. If you are not ready to dive into the deep end, the best solution would be to enable an automatic impressions strategy, such as "Average CPC" or "Average CPA". The combination of settings that are contained within these strategies will allow you to transfer to the new auction model both smoothly and efficiently.