Yahoo Launches Panama Ad System

In an effort to catch up to Google in the search engine ad market, Yahoo overhauled its ad system. Does the new system, named Panama, get the job done? We take a look at reviewers’ opinions, and form a few of our own.

"We Try Harder."

– Avis, number two car rental company

On October 17, 2006, Yahoo formally gave details of their Panama ad system, their next generation advertising platform. I have watched for months alongside other advertisers as Yahoo gave tantalizing tidbits about the benefits of the Panama ad system. I have always been a proponent of low cost (or unpaid) alternatives to pay per click systems; mostly I try to ”behave organic, act paid.”

And I always recommend AdSense (it works if done well) to any client that asks for a paid advertising package. I always view SEO first from the perspective of a user, then from the perspective of a publisher, and finally from the perspective of a marketer. This fits, since I am basically a copywriter/designer first, and offer SEO for clients who ask for it. But the Yahoo Panama package is quite interesting (and quite historic also). It and may actually be the model for all successful advertising platforms (PPC) since it targets ads on a geographic basis (local search), and incorporates behavioral data into the ads it returns.

By December 14, Yahoo let bloggers test the system; we will take a look at what they said shortly. A week later the search engine rolled it out for voluntary migration. Yahoo is switching its users over in phases, starting with present subscribers to their current ad system moving voluntarily to the Panama platform. The first wave of these were supposed to begin switching in late 2006; by mid or late 2007, switching will be mandatory for all (including new users, who can still subscribe to the Data Traffic Center platform). Switching from DTC to Panama cannot be reversed.

I have had the opportunity to peek at some notes of some of the reviewers Yahoo invited to test the platform as “external testers,” namely bloggers Brian Schwartz (marketer and writer) over at Search Engine Watch, Andy Beal (Ask Proponent, Google Basher), and Andrew Goodman and Mona Elesseily over at Traffick.

We will look at their live reviews, and also look at some shortcomings that Panama seeks to redress. We will also examine some similarities between Panama and AdSense. I may ramble a bit about my pet peeves against pay per click systems (I promise to keep this to one paragraph). We will look at the benefits the new geographical targeting will offer marketers, and some hidden advantages that Yahoo has not gone into details about, such as behavioral search and discounts for quality ads which get the highest click throughs. We will see whether Panama is a better option in the long term for web site owners (publishers).

The Reviewers

The bloggers were taken to Yahoo Search Marketing offices in Burbank and treated to live reviews of the system. They actually got to see their ads show up in search results and tool around with the control panel for days. Yahoo’s John Slade, senior director of Global Product Management, Zod Nazem (CTO), and David Ku (VP engineering) gave background information on its development over the past two years. Basically Yahoo is betting that the platform will increase conversion ratios and thus increase revenue for sites that advertise on it. And how do they intend to do this?

Local Geographical Targeting

Now small regional companies with offline outlets can target searchers in their specific locale with Panama, using technology obtained when they bought Whereonearth (a British geo targeting company). Yahoo allows advertisers to target by market, region or city and surrounding regions. The new system also handles explicit location queries like “Computer maintenance centers in Sacramento.” This means advertisers can target their bids at specific regions only and ignore broader general markets. This gives more focus and direction to your goal setting.

This geo targeting is one of the biggest ”pros” of the Panama system, although the Yahoo staff seemed to be surprised at the fact that most of the bloggers constantly referred to it. You can see screen shots of the interface and some comments by Schwartz at  http://blog.searchenginewatch.com/blog/061017-174500.

Other benefits include rapid activation of advertising campaigns and definite start and end times for the ads which should reduce advertising costs and increase conversion. 

There is a customized forecasting tool for each user. It allows each advertiser to view previous data on conversion rates, impressions for a specific key word, and revenue generated, all in a cool easy-to-use AJAX format. This allows for a reduction in costs incurred and lets the user to interact with the forecasting tool to determine how campaigns should be run. The user inputs geographical settings, key words and key word match type, and the system outputs the current data available on CTR and impressions. This tool will be continually updated.

The next interesting part was the interface features and the usability. According to the Yahoo presentation team, the team that developed Yahoo Team Beta also developed the interface that advertisers use to interact with their accounts, so expect a system predominantly geared towards broadband connections. According to Schwartz migration is relatively easy, and sign up is user friendly and should encourage DIY campaign management from web publishers.The reviews make it seem as if anybody can manage a Panama ad campaign. This is a good thing as long as the conversion rates are good.

Yahoo has being releasing information for those that access their ad platform programmatically via APIs since June. Yahoo however says that not all APIs will be free.

Extra Stuff

You can test ads before going live with them, so you may want to test likely responses that customers will give to your ads. There is an image-based quality index for your ads that lets you know how well your ads are faring next to those of your competitors. Ads will be placed according to bid and quality (more on that immediately after this section). The pricing is relatively competitive, with bids in increments of one cent above the next person – no matter how high your limit is, you only get to pay one cent above the person below you.

The platform will be rapidly changed based on feedback. The team responsible for updating Panama is already in place; their task is codenamed ”project Roosevelt,” so we could see a situation where updates are done rapidly with as little fanfare as possible. In true web 2.0 fashion, updates will be based on user experiences, changing economics and pricing schemes, and improvements. Some of the changes could also target user demographics over the long term, and also give the ability to adjust campaigns to suit certain user behaviors.

So how will Panama fare against AdSense? Will Panama chip into Google’s Goliath-sized share of ad revenue?

Apart from the geographical targeting option, the whole model is based on Google’s PPC model, including the “quality index” which is simply how many click throughs you get. So with this model, Yahoo is aiming to deliver more quality results to the user — but it is simply a quick lesson learned from Google, who originally hijacked Overture’s (Yahoo’s) auction based PPC model, paid for it (literally) and then improved on the ranking algorithm. According to Andrew Goodman, Data Control Center was simply a spreadsheet compared to Google’s AdWords; now Yahoo is on par with AdWords, and some bloggers are rooting for it to beat Google.

But how feasible is that? AdCenter couldn’t beat Google in search advertising. Yahoo is second after Google. The Avis of search is positioning itself to "take over the Internet" with its the restructuring it announced in early December. In case you missed it, Yahoo is dividing itself into three sections to reflect its core competencies as it tries to become more focused on searchers, publishers and their technology support (design and software engineering).

Google, however, should look over its shoulders; sometimes being number two does make people try harder. Still, even if Yahoo’s Panama gives a more cost effective model with higher conversion rates, Google has all those eyeballs hooked. Despite the “search only” Yahoo search page, Google is still synonymous with search in the minds of hundreds of millions of users from San Jose to Shangai.

The real deal is, nobody knows exactly what Google has up its sleeve. The search giant changes everything quite frequently, and is not yet looking ruffled at all with the new generation of ad platforms. Google’s stock crossed five hundred dollars per share price in November, a period where Yahoo’s share prices dipped and sawed.

A $12 billion (and growing) industry is up for grabs. Advertisers want more ROI, but for now will put their money where the eyeballs are (Google and Yahoo) until an ad platform comes along that can address ad targeting, increase conversion rates, and reduce click fraud. Yahoo claims to be the most experienced when it comes to incidences of click fraud, and is more transparent in its policing. Yahoo also claims that Panama will improve conversion rates, but, like all good puddings, the proof is in the eating.

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