Yahoo explains its new bidding system

The New Bidding System

Helpful hints for managing your account

No feature of the new Sponsored Search has garnered more attention in the blogosphere than the bidding system, with its snappy, graphical presentation and dynamic slider-bar functionality.

Kudos aside, we know new things can sometimes be a little bit confusing. So here’s a little play-by-play of how the new bidding system works. Take a look at the screenshot below:

Notice in the lower-right corner (highlighted) that there are two boxes. Each box contains a data tool that corresponds to a specific set of information: Estimated Clicks per Bid and Bid Range for Top Positions.

Bid Range for Top Positions
This bit of data is designed to help you with your bidding decisions at the ad group level or at the keyword level depending on how tightly you want to manage your bids. In general, you may want to manage at the ad group level, as you might find this to be easier. For special, high-priority keywords, however, you may want to manage at the keyword level. (To manage at the keyword level, just click on the keyword itself.) The Bid Range for Top Positions column is designed to offer the latest available range of bids for the positions at the top of the search results page. Want to appear at the top? Then your bid must be within or above this range.

Estimated Clicks per Bid sliding graph

This groovy little widget is designed to help you understand the number of clicks your ad may receive for a given bid. This information is important if you want to see how changes in your bid may affect your results. By moving the slider back and forth to increase or decrease your bid, you can see how your estimated monthly clicks, your position and share of available clicks may be impacted. The estimated number of clicks is calculated using your bid and historical keyword data (such as the previous bids of other advertisers, monthly click volume for your keywords, and other factors).

So which tool should I use?
It depends on what you’re trying to do. If you want your ad to appear at the top of the search results, then consider using the Bid Range for Top Positions to help guide your bidding. If you want to estimate how many clicks you may receive for a particular bid, use the Estimated Clicks per Bid sliding graph.It’s important to note that the Bid Range for Top Positions uses recent data and the Clicks per Bid sliding graph uses historical data, so there may sometimes appear to be a discrepancy between the two data sets. Also, please remember that both of these features use estimates only and are not a guarantee of click volume. Factors other than bid amount—such as the bidding behavior of other advertisers, your campaign settings and your ad performance—may also influence your position.

Thanks and happy bidding!

—The Team

Source: http://www.ysmblog.com/blog/2007/01/08/the-new-bidding-system/