New Panama Ranking System For Yahoo Ads Launches Today

Today, Yahoo will flip the switch for the new "Marketplace Design" algorithm
in the US market, the system commonly known as Panama. Parts of Panama have
already gone live in the past few weeks. But throughout today, Yahoo will be
rolling out the last piece — a new ranking algorithm and its associated new
pricing mechanism.

With the new ranking algorithm, Yahoo will move from its long-standing and
original bid-to-position model (where those who pay the most rank first) to a
system that takes bids, ad quality and other factors into consideration in
determining how ads are ranked on search results pages (a system similar to that
long used by Google).

Yahoo’s motivation is to provide more relevant search results and a better
overall experience for users, as well as increase monetization — to earn more
from the ads its shows. In a recent Yahoo Search Marketing newsletter, Tim
Cadogan, vice president, search marketing, said:

We firmly believe that delivering more relevant ads to users will result in
more quality leads to advertisers, invite even more participation in our
network and ultimately create a more valuable marketplace for users,
advertisers, publishers and Yahoo.

Cadogan’s also featured in a New York Times

article today looking at the business issues of the Panama rollout for
Yahoo. But for Search Engine Land, how does it impact advertisers? In the new algorithm, ad quality scores are crucial. Those with better
quality are more likely to rank better (and perhaps pay less) than other ads. So
how is ad quality measured, and how can you do better in the new system? Some
tips, below.

Historical Clickthrough Rates

Historical clickthrough rates (CTRs) are one part of how ad quality scores
are determined. To get this information, Yahoo will pull data (relative to other
ads displayed at the same time) from both the old system and the new Panama
system. The new ranking algorithm emphasizes data "freshness" and will use the
most current information available.

For example, a high volume term may require ten days of historical data while
a lower volume term may pull thirty days of data to determine historical CTR.
The rolling window will ensure historical CTRs are calculated on current market
data.

Expected Clickthrough Rates

Expected CTRs are also used to determine ad quality scores. This is largely
machine-based learning and expected CTR is determined by various relevance
factors relative to other ads displayed at the same time. Some of the major
relevance factors considered in the new algorithm are:

• Bids
• CTRs
• Ad copy (titles & descriptions)
• URLs
• Landing pages
• Advertiser information
• Advertiser industry segment

Yahoo is obviously not fully disclosing their secret algorithmic sauce. When
asked, Yahoo would not provide details on what "advertiser information" and
"advertiser industry segment" meant in terms of the CTR calculation.

It’s worth noting, as many algorithms work together to determine ad quality,
every advertiser and every keyword will have a unique quality score and all
relevance factors may not hit every keyword term or phrase.

At first, landing pages will be lightly weighted in the quality index
calculation. Yahoo doesn’t want to throw too many curveballs at advertisers as
they adapt to the new ranking formula, so landing page relevancy won’t be a big
part of the formula for now. In the future, they expect this will have a bigger
impact on quality index and will notify advertisers before implementing the
change.

Graphical Display Of Quality Index

Advertisers who’ve migrated to the new system will be able to see overall the
quality index displayed in a graphical format. Yahoo will use a five bar system
to represent the quality index. Five bars will be the highest quality index
score. Here’s an example:

The quality index will be calculated at the keyword level, but the data will
be aggregated and displayed at the ad group level. Yahoo claims this will make
it easier for advertisers to visualize the quality index. The quality index will
not be available at the keyword level.

Migration & Ranking Tips From Yahoo

Yahoo has recommended that advertisers take the following actions to prepare
accounts for the new ranking algorithm. They are:

1. Include keywords in your ad (use the Insert Keyword feature)
    
2. Carefully determine keywords for your ad group
    
3. Use ad testing to learn which messages are performing best for you.
    
4. Use the Excluded Keyword feature to help optimize your Advanced match type
    
5. Review your current bids and set a campaign budget to meet your business
   goals.

For more tips from Yahoo, see
this
page about the migration.

Additional Points On Panama Ranking Algorithm

1. Standard match type, ads will no longer receive priority placement over
   advanced match type ads
    
2. For certain terms, fewer sponsored search results may appear at the top of
   the page
    
3. Marketplace Design will roll out on both the new Panama and old systems

Good luck everyone with the migration, and feel free to add your own tips and
experiences in the comments below!

Mona Elesseily is a contributing
writer for Search Engine Land and an
internet marketing strategist at Page Zero Media,
focusing on paid search campaigns and conversion improvement. She’s also author
of Page Zero’s
Unauthorized Yahoo! Search Marketing Handbook.