Twenty-eight teams in three different locations are building the system that will re-shape the way paid search engine ads are displayed on Yahoo. The new interface will show ads with graphics and video, not just text.
However, the initial version will work on a smaller scale. Advertisers can enter the keywords they want their ad to appear next to and the most they are willing to pay per click. There also will be an option for geotargetting, or specifying a geographic region in which the ad will be viewed. Google already offers this option.
The company would not say how much revenue it expects to generate from this new technology, but a market expert predicts it will increase Yahoo’s search-advertising revenue more than 20 percent immediately — approximately $125 million in the fourth quarter this year and $600 million in 2007.
So how will Yahoo’s search advertising differ from Microsoft or Google?
The company says it will offer advertisers more information about their ad placement, like estimating how many clicks per day a given bid will generate. It also will show how many more clicks they estimate an ad will receive for each bid increase.
“One of the primary complaints we get is users can’t explain to their bosses what they could get for spending the next $1,000,” Steve Mitgang, Yahoo’s senior vice president, told the New York Times. “Now they can take this to their bosses to justify spending more.”
After Yahoo purchased Overture Services for $1.6 billion in 2003, the company began to realize the confines in its own proprietary software, which has led to its lag behind Google in online search ads the New York Times reported. While Google is the anointed king of online advertising, Yahoo also faces renewed competition from Microsoft, which is developing its own search-advertising model.
Google’s ad service dominates the market because it implemented an algorithm that predicted the popularity of certain ads so the most profitable ones would be placed on top, where most surfers tend to click. Previously the price of an ad and its placement was determined by a computerized auction resulting in a system where the advertiser that listed the highest bid-per-click was listed first.
While the company anticipates the release of Project Panama it will still continue to operate on its old system software.
“We are flying an airplane while rebuilding it,” David Henke, Yahoo’s vice president for engineering, told the Times. “This is a bigger project than we expected because we are doing it in parallel with our existing systems.”