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The adCenter blog announced that the UK and Canadian ads will now be based on a quality-based algorithm.  This move will most likely drive up PPC costs on Microsoft’s search network.

Previously, one of the methods of increasing affiliate profits were to target searches outside of the US with very little competition for keywords that are otherwise untouchable in the US market.

Based on the reports I have seen so far, the algorithm changes do not go as far as the Google adwords quality score, however they seem to be based on your click-through rate and maximum bid price.

Microsoft has had this algorithm in place for the US market for over a year.  I would imagine they will be implementing it on a global scale soon.

Kevin