When Yahoo's next-generation online advertising system was launched on 5 February this year, it was expected to be a panacea for Yahoo's ailing fortunes. Yahoo's Panama ad system is designed to take ad quality and other factors into consideration in determining how ads are ranked on search results pages. Panama includes a new search ranking algorithm, which takes bids, ad quality and other factors into consideration. Along with the algorithm changes, there is a new pricing mechanism and a lot of other functionality for advertisers (e.g. an API).
The key addition is 'ad quality', which Google has been doing for years with AdWords. So Panama was always going to be a game of catch up for Yahoo. With that in mind, and nearly 6 months after Panama's launch, how is it performing?
Yahoo Response
I asked Yahoo for some data and metrics on how Panama is performing - has it increased ad sales, is the 'ad quality' improving? Gaude Lydia Paez, Director of Corporate Communications, responded that they can't provide specific metrics around performance, given that it's tied to their financials. However she did tell me that "the global rollout of Panama is progressing extremely well, and we are seeing strong performance in our US O&O search operations."
While no metrics were given, Paez told me that in Japan they recently launched the new ranking model "and feedback from advertisers has been positive - clickthrough rates are up and the prices our clients pay for leads are down."
Since the launch in the U.S., Yahoo has also "introduced several enhancements to the model that have focused on filtering poor ads and surfacing higher quality ads to the user." Paez said that Yahoo has "introduced quality-based pricing, which allows us to charge advertisers less for a portion of the traffic they receive, depending on the overall quality of the source."
External Reports
While Yahoo itself is remaining relatively tight-lipped about Panama results, others have reported mixed results. Search Engine Roundtable wrote at the end of April that four different SEMs in a Search Engine Watch Forums thread noticed a drop in volume from Yahoo! Search Marketing since the Panama upgrade. One said that although "the interface is much better and the account maitenance is somewhat easier", in terms of performance "we are down quite a bit from where we were pre-Panama. ROI is similar, but volume is way down." Another SEM reported "an extreme decrease in volume."
On 20 June, John Battelle published a report from Reprise, a leading SEO/SEM firm that works with Battelle's company FM Publishing (R/WW is an FM Publishing client). Reprise concluded that on performance, Yahoo's CPCs went down and click through rates went up. It stated:
"While campaign conversion rates were improved on both Google and MSN, Yahoo's conversion dropped off 5%. In other words, while perceived ad relevance may have improved, the truly important metric in the campaign suffered somewhat. "
Source: Reprise
The whole report is available as a PDF on John Battelle's site, but to sum it up: the technology of Panama is promising, but it is not yet delivering on the promise. In Reprise's words:
"While the launch of Project Panama represents a significant step forward for the Yahoo Search Marketing platform, it does not yet address all of the requirements of the market. Though the system makes strides towards establishing industry standard campaign structure, terminology and API access, it often finds itself under-delivering on the actual execution of these new features."
However Reprise notes that Panama is "brand new" and "needs time to find its footing and refine its offering."
Finally, a browse through Search Engine Land's recent report on the online advertising industry shows that not much has changed in the past six months. SEL noted that "Google is by far the dominant engine, and that's been the case all year, despite Yahoo's Panama launch and Microsoft's increased focus on AdCenter."
Conclusion
I was hoping for a more conclusive 6-month report on Panama, but really the jury is still out. Yahoo itself is (unsurprisingly) reporting positive changes. Meanwhile the response from the market has been mixed, but cautiously optimistic. Most reports so far have noted Panama's promise, but that it is not yet delivering better results. The upshot is that after six months, Google is still the dominant player in online advertising and there is little sign of that changing any time soon.
If you are using Panama, what have your experiences been like so far?
With this post, we close our file on 100 Days For Yahoo. Let us know whether you like the idea of Read/WriteWeb Files - i.e. focusing on a specific topic over a week.
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