Preparing for Panama

Commentary: What Marketers Should Know About Yahoo's New Search Platform

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It's sometimes easy to forget that Yahoo, through its acquisition of Overture, basically invented the paid-search market. It was in 1997, nearly two years before anyone anywhere "Googled" anything, when (what is now) Yahoo introduced the pay-per-click search auction and launched a whole industry.
Joshua Stylman and Peter Hershberg, managing partners of Reprise Media. | Submit your comments below.
Joshua Stylman and Peter Hershberg, managing partners of Reprise Media. | Submit your comments below.

Since those times, major competitors such as Google and MSN have improved their campaign management tools and ad-ranking methodologies, but Yahoo's hasn't changed much. Its system has remained the last, large simple auction, where those who bid highest ranked first.

That model is no longer effective, and Yahoo's impending changes mark the end of an era. As a result, search marketing is about to change significantly.

Yahoo is in the process of rolling out several changes, known collectively by the code name "Project Panama," which will bring many features within its system in line with market leader Google's AdWords. The most important of these enhancements has yet to launch: a wholesale change in the methodology Yahoo uses to rank its paid-search ads.

This upgrade, due in first quarter, will allow Yahoo to evolve into a quality-based auction, where a series of factors including click-through rate, ad relevancy and keyword choice will have an impact on an ad's final position. Highly relevant or useful ads that get lots of clicks may actually end up costing less to rank higher.

So what does that mean for marketers?

First and foremost, it means that the bid-based auction marketplace is no longer a level playing field. Advertisers no longer know what anyone else is paying for placement or exactly how much it will cost to outrank them.

Instead, marketers' focus will shift from managing their bids to managing the entire conversation with their customers. By improving attributes such as the relevance of keywords, ad copy and landing pages, advertisers provide a better user experience while having an positive influence on their own ad costs.

It also means that managing Yahoo ads will be easier, or at least much more familiar. Yahoo has dramatically improved its system's interface, giving users access to many tools that are standard at Google and MSN, such as the ability to set budget caps, better test variation on ad copy and the ability to make global changes to a campaign's components.

These changes are good for Yahoo. On the one hand, the increased relevance of the ads should mean that Yahoo maximizes the profit it earns from every click, similar to when Google introduced its system.

On the other hand, the changes should benefit the industry as a whole. Google's lead over Yahoo is substantial, but the market always wins from having two or more viable choices. This kind of healthy competition will foster continued product development at the engines, giving marketers more efficient, more effective ad opportunities.

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Peter Hershberg and Joshua Stylman are managing partners of Reprise Media. For more information, visit or, their daily search-marketing blog.
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