Many great blogs cover the day-to-day news of search, so I don’t spend much time duplicating them. But once in a while, a story is so important that I can’t leave the coverage to others. Yahoo!’s long-awaited delivery of its Panama project is one such story. At 3 pm US Pacific Time today, Yahoo! will convert its top-bidder paid search auction system (that it bought from Overture) to its new hybrid auction system. The world will be watching—including search marketers.
Search marketers care about Panama because they must learn a new tool and, for some, a new way of working. Any search marketer that exclusively uses Yahoo! for paid search is accustomed to the traditional top-bidder auction, where the highest bid for a keyword grabs the top spot. Top-bidder auctions are easy to understand, but hard to manage, with bidding tactics such as bid jamming—requiring search marketers to use bid management software to respond to what competitors do.
Google pioneered the hybrid auction, where bid amounts alone are just one factor in which ad is shown first. Google uses clickthrough rate and page quality in its paid search rankings, but the concept of a hybrid auction allows any criteria to be used, the same way complex organic search ranking algorithms do. Last year, MSN Search revamped its paid search auction to adopt the hybrid approach, dumping Yahoo!’s Overture system in the process.
Search marketers usually find hybrid auctions easier to manage. You still need to use bid management software, but because clickthrough rate is not as volatile as bids can be, the rankings are less volatile and marketers can think more strategically. Search marketers will be poised to see how Yahoo!’s new auction makes their lives easier and fills their coffers higher.
But search marketers have another reason to watch. MSN Search has seen no real gain in popularity since it moved to its new hybrid paid search auction. Yahoo! Search’s popularity has been flat in recent months, also, while Google has gradually increased its share of searches.
Can Yahoo! turn around this trend around, making the search market more competitive? Recent criticism of Yahoo! has raised the pressure on the company for Panama to be a big win—so much so that Yahoo! has advised analysts not to expect any revenue boost from Panama until later this year.
I’ve had conversations with search marketing experts that believe that Yahoo! is so far from catching Google that it is more likely to fall behind Microsoft. I don’t agree with this viewpoint, but it shows how critical Panama is to Yahoo!’s prospects. Search marketers should be rooting for Yahoo! and Microsoft to give Google a better game because they want as much innovation and price pressure as competition can bring.
So cross your fingers today and let’s see what Yahoo! can do.