Yahoo! is testing a new paid-search ad model overseas that will more closely resemble Google’s in considering both clickthrough rates and bid prices in deciding to deliver ads.
Forbes magazine quoted RBC Capital Markets analyst Jordan Rohan as saying that the test, codenamed “Project Panama”, is currently underway in Scandinavia and may expand next to the U.K.
Currently, Yahoo! determines which ads to deliver on a keyword search based solely on the price that advertisers bid for placement. The pilot program tests a system that considers other factors including relevance, as judged by the number of clicks the ad receives. Google’s algorithm uses both bid price and a “Quality Score” to select the ads that should appear on a search results page.
According to the report, Yahoo! has notified some high-volume search advertisers of impending changes in its operational model. A full rollout of the new ad system in the U.S. and Japan could happen in late 2006 or early 2007, the story said.
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