The system has not yet been officially named, but is for now termed "Panama". Yahoo! is expected to introduce their new advertising system in the US ahead of schedule, on February 5th; thereafter the system will be launched internationally, starting with Japan. The technology gives Yahoo! the opportunity to increase their revenue and catch up with search market leader Google.
Yahoo!'s pay-per-click advertising system currently displays business adverts on a purely "highest bid" basis for keywords, which determines where the business appears in the search results page. But this lack of targeting has meant that Yahoo! and its clients have experienced a relatively low ROI. Google's PPC system, on the other hand, bases ad listings on the relevancy of the ad to the keyword entered by the amount of people clicking on the ads, as well as the bid for that particular keyword.
Under its new ad system, Yahoo! will expand the criteria it uses to decide where an ad appears, beyond just its price. The search engine will take into account the ad's performance by measuring how often it's clicked on, as well as other factors. In theory, this should boost the effectiveness of Yahoo!'s ads.
Yahoo! has not yet indicated as to how much they expect Panama to improve revenue. However, Yahoo! executives have said Panama's ability to draw more advertising dollars from clients should help accelerate growth beginning in the second half of the year.
Justin Post, an analyst for Merrill Lynch, commented:
"Yahoo! remains a growth acceleration story. We remain positive on Panama."
Some analysts have, however, taken a more cautious view, noting that the move to Panama could incur some short-term costs if advertisers pull back on spending as they learn to use the new system.
For advertisers, there will be a new interface and system to learn; but reports on the ease of use so far have been positive. Moreover, current web search advertisers believe it will be good to have an alternative to Google, thus easing their dependence on one search engine.
But Yahoo! are not stopping there, with more introductions expected this year. Among them are: a deal to sell ads on eBay, an agreement with a newspaper consortium to run job ads online, and a partnership with ad network Right Media to sell space on less-trafficked Yahoo! pages.
