A study released by comScore shows that, initially at least, Yahoo’s new Panama ranking model has had a positive effect on sponsored search click through rates.
The study sampled 1m US internet users, comparing the first two weeks after the launch of the new ranking model to the previous week. The study found that CTR increased by 5% in the first week and 9% in the second.
For the same period, Yahoo’s main competitors, Google and MSN did not record similar increases in CTR, which seems to indicate that the new system is working well so far.
Yahoo introduced the second phase of its Project Panama technology on February 5th to take advantage of a new ranking model. Previously, Yahoo had been displaying ads based solely on the amount advertisers paid for its auctions of keyword search terms.
The new system takes bids, ad quality, click-through rates and other factors into consideration in determining how ads are ranked on search results pages. Yahoo aims to use Panama to provide more relevant search results to users, a better overall experience, as well as increasing earnings from its ads.
Yahoo has invested heavily in the new ad platform, in order to compete with the success of Google’s AdWords and AdSense programs.
In the week ending February 4, which was before the switch to the new Panama ranking model, sponsored clicks as a percentage of total clicks was 10.1%. By the following week, this had increased to 10.6%, and by the week ending February 18, the figure was 11.1%.
James Lamberti of comScore was impressed by the positive start for Panama:
“Google still has the best performance, but Yahoo has made gains. We’ve seen an immediate impact. That’s 50% of what they need to have happen to deliver on what they have promised.”
“That’s evidence of the impact of Panama. We’re seeing Yahoo narrow the performance gap against Google, which is the market leader in this particular metric.”
It’s still early days for Yahoo’s new ad model, but, as the comScore report shows, the early signs are promising. If this performance continues, a 9% increase in Yahoo’s search ad clicks could boost the company’s 2007 search revenues by 45% to $1.39 billion.