Yahoo! looks to Panama to boost share

It launched in the US in February and the company is beginning a global programme of migrating clients on to the new platform. Internet metrics company comScore has released initial research findings (see table), which show a positive response in click-through rates and click composition-sponsored links as a percentage of total clicks.

The question now is: can the new Panama platform reinvigorate the company after a difficult 2006 and when will it launch in the UK? Yahoo!'s share price fell last year after the then chief financial officer Sue Decker warned of weakness in economically sensitive areas of advertising such as automotive.

And the company's cause was not helped by the leaked "Peanut butter memorandum" from US senior vice-president Brad Garlinghouse, which claimed Yahoo! was spreading itself too thinly.

Migration of the search platform to the UK will begin in two phases in the second quarter of 2007, according to Richard Firminger, Northern Europe regional sales director at Yahoo! Search Marketing.

Moving advertisers

The first part of the process is moving advertisers onto the new platform, something Firminger describes as "no mean feat".

After that, Yahoo! will acclimatise its clients to the new ranking model, key to Yahoo!'s developments as it changes the bidding system. Rather than just the highest bidder appearing at the top, the quality of the creative is given a score that affects the ranking of the search result. This model is designed to increase the relevance of the search result for the consumer, and thus increase return on investment for the advertiser.

The second part of the migration process is introducing geo-targeting for advertisers in 11 different UK regions. The turnaround in ad activation will also be quicker than the 72 hours it could take previously - a useful tool for e-commerce companies looking to sell the last remnants of stock, such as concert tickets.

But there are some who feel that Yahoo! is getting into the game a little late. The delay in the release of Panama was well documented in the press last year, but Firminger insists it was important to get the product right before going to market.

"Terry Semel (Yahoo! chief executive) had it right," he says. "It is better to succeed in the long term than please the market in the short term." But Firminger does not underestimate the job of transferring people onto a new system, while still keeping ads running. "It's like trying to rewire a plane at 30,000 feet," he says.

Daniel Mohacek, product strategy director at The Technology Works, says his company, with sister agency The Search Works, has been monitoring Panama's performance for its US clients and the impending roll-out in Japan. "Yahoo! will get better monetisation out of it," he says.

Yahoo!'s market share has remained relatively static for a while now, but Mohacek believes Panama could "pull it level and, in quality terms, possibly pull ahead".

However, Duncan Parry, director of strategy for search agency Steak Media, believes Yahoo! is just playing catch-up with the launch of Panama, "but at some point can it start playing leapfrog?".

Agency response

Agency feedback about Panama is generally positive. Media Contact's head of search, Grant MacFarlane, says his colleagues from the agency's global centre of excellence are upbeat about the new technology's prospects. He thinks Panama is bringing Yahoo! in line with the rest of the search industry as it is similar, he says, to Google's platform.

"It offers the industry standardisation," he explains. MacFarlane also credits Yahoo! with moving from an open to a blind auction, which, combined with the ranking model, will make for a much fairer marketplace, he says.

Google has been dominating the search sector for so long that Yahoo! has widely been assumed to have lost the race. Panama is Yahoo!'s attempt to rectify that situation and boost its search market share. Early reactions suggest that media agencies welcome a little competition in the market, but it is still too early to tell if Terry Semel's long-term vision of success is likely to be realised.

YAHOO! PANAMA RESULTS

Initial results:

Figures from the week ending 4 February, before the ranking model launched, were used as a baseline

- Weekly sponsored search ads, click-through rates

Week ending

11/2/07: +5%

18/2/07: +9%

- Sponsored click composition - sponsored clicks as percentage of total clicks

Week ending

4/2/07: 10.1%

11/2/07: 10.6%

18/2/07: 11.1%

Source: comScore.