According to a report released by SearchIgnite and CNET, a search advertising agreement with Google could result in more than a 20 percent hike in costs for keyword search advertising.  The report scoured 12 million paid search clicks from January through June via 15,000 active keywords.  Using SearchIgnite’s technology, SI examined the cost difference between Yahoo and Google for tail terms, head terms, and brand terms.

“The deal is clearly financially beneficial for both Yahoo and Google, however, advertisers need to be aware of the potentially significant impact to their search marketing efforts,” Roger Barnette, SearchIgnite president, said in a statement. “Most marketers will see their overall costs for search advertising across the Yahoo network increase, and will need to adjust their search strategies accordingly.”

SearchIgnite’s findings share a particular relevance as lawmakers are scheduled to meet shortly to discuss antitrust concerns arising from a Yahoo-Google deal.

According to Yahoo the site planned to use Google ads primarily for its tail category of links, keywords used for the most specific of targeted searches.  While the first search keyword return differs by about 12% among Google and Yahoo, it differs by as much as 28 percent or more for the No. 5 spot.

According to the report:

The price difference for bidding on tail terms on Google vs. Yahoo increases as the ad’s page rank decreases. Therefore, it would be economically advantageous for Yahoo to outsource a significant amount of their tail term inventory, paying closer attention to the outsourced inventory’s rank rather than the keyword terms themselves. Acting this way, Yahoo should be able to better monetize the majority of their tail terms with the Google partnership.

Interestingly, Yahoo generates more revenue (charging more) for its top head terms, terms that are more generic in nature (a la “web hosting). 

While a Yahoo-Google combination will certainly reap synergies in terms of sharing of advertising relationships and information, a sudden rise in cost for certain keywords for no other reason other than the combination will undoubtedly raise anti-trust issues.