Yahoo Redesigns Search Ad System

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Industry experts think Yahoo will compete better with Google and MSN on paid search advertising after announcing last week that it will revamp its ad ranking system.

New campaign management features, which roll out in the third quarter, include a new ad ranking system based on quality and relevance, enhanced geographic targeting, faster campaign activation, ad testing and more visibility into campaign performance.

"This is the most significant development on the platform side since MSN debuted with adCenter with demographic targeting built into it," said David Berkowitz, director of strategic planning at search marketing firm 360i, New York. "It will make an impact on everything from the ranking of ads to how they're able to target and what they're able to do."

Yahoo Search's ad program will have more targeting similar to that of adCenter and could include targeting by "demographic information or online behavior" in the future, according to a Yahoo statement.

"Once the first version of the core platform is in place, we will be able to move quickly to build in capabilities that ultimately will provide advertisers deeper access to Yahoo's more than 420 million users," said Steve Mitgang, Yahoo senior vice president of advertising platforms and products.

Yahoo also aims to broaden ad distribution and formats to allow more graphics and rich media within ads.

"We've designed our new platform to allow advertisers to reach Yahoo's audience through search as well as take advantage of advertising opportunities across all of our unique marketplaces," Mr. Mitgang said.

But changing the quality and relevance of ad rankings is expected to have the most effect on search advertisers. Yahoo Search's new Visibility Quality Index will score ads based on quality, bid and other relevance variables. Advertisers will be able to see these scores so they can gauge and optimize placement. Yahoo also will report on "share of clicks forecasting," which displays the bid needed to achieve an estimated specific share of expected clicks, "helping advertisers to set and reach traffic and conversion volume goals," a Yahoo statement said.

Mr. Berkowitz predicts that the ad relevance changes will benefit big brand marketers.

"The quality-based ad rankings are going to lead to more relevance in the advertising," he said. "We think that will improve the consumer experience ... and improve the overall results for advertisers."

The ad relevance changes also will help Yahoo compete better with Google on monetizing search advertising. Google generates about twice as much as Yahoo on paid ads because AdWords is based on "how much the advertiser is willing to pay and how often the ad is clicked on," said Matt Booth, program director for interactive local media at The Kelsey Group, Princeton, NJ.

"This is about closing the gap between these two systems," he said. "In Yahoo, if no one clicks on my ad, I'm still at the top. Consumers get to see my ad, but Yahoo doesn't get [as much] money."

But changing the relevance and quality of ads likely will change advertisers' placement in the results.

"Any time you change an advertiser's position or change how the advertisement looks on the page, there is bound to be complaints," Mr. Booth said.

The geo-targeting features also are important to advertisers, Yahoo spokeswoman Gaude Paez told <I>DM News.<I>

"We spoke to thousands of advertisers for feedback," she said, "and what we heard they wanted most was more ease of use, more placement transparency than other providers, more precise geo-targeting, more insight into what they're getting for their ad dollars and more insight into how certain campaigns influence/interact with others."

The platform will incorporate IP targeting and technology from WhereonEarth, a company Yahoo acquired last year, letting Yahoo match results with the searcher's intent. For example, the system can understand whether users are searching for SoHo, New York City, or Soho, London.

Yahoo's program also will contain more tracking, forecasting and reporting for search advertisers. The platform provides analytics previously offered to advertisers on an invitation-only basis through its Search Optimizer.

"The new platform now allows every advertiser to take advantage of those capabilities if they want to," Ms. Paez said.

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