HELFT, MIGUEL. “A Long-Delayed Ad System Has Yahoo Crossing It’s Fingers.” New York Times. 5 Feb. 2007.2p

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 In class we have been dealing with models in which the slot an advertiser gets is based solely on their valuation of that slot. In reality, the value of a slot to an advertiser is not the only criteria used to place them. This article talks about how big players in the keyword advertising business use a mix of bid price and ad relevance to a given search in order to maximize revenue. Basing slot assignment solely on the advertiser’s needs is not a good strategy. Click rate is not a static phenomenon; it is dependent upon the degree of relevance of an advertiser to a given search as well. If the highest bidding advertiser for a keyword is not a well known company or is not relevant to the word they are bidding for, the clicks per search go down and the search engine loses money.

The article focuses mainly on Yahoo and the release of “Project Panama,” their new ad system that they project will gain them much more revenue starting about half a year from now. This new system will allow advertisers to target certain geographical regions and test expected effectiveness of their ad. It coaches advertisers on what and how to bid based on the user’s budget and the number of customers they want to bring in. The article is interesting because it goes behind the scenes of keyword advertising. It talks about the difficulty of changing a running system and the long hours spent getting “Project Panama” launched.

Project Panama is not expected by any means to eclipse competitors like Google or MSN. Rather, it is aimed to get Yahoo back into the online advertising game after neglecting to update itself sufficiently over the past year where Yahoo shares fell from $22 per share to $35. While Google makes 4.5 to 5 cents per search, Yahoo makes a mere 2.5 to 3 cents. These numbers, while small, multiply to a difference of billions of dollars a year.

The article also mentions Google’s new strategy of displaying fewer advertisers employed last Wednesday. The change makes the search experience better for users as they see less ads with more relevance. Google is already seeing more clicks per search since the release of their new strategy.