Panama Seen As Beneficial to Brand Advertisers

As more early results roll in, it appears that Yahoo’s Panama platform is delivering as promised, improving ad performance for big-brand advertisers and quality of results for searchers.

The latest data to support this comes from search and media management firm SearchIgnite and RBC Capital Markets’ research arm. A study of early results from clients of SearchIgnite, and sister firm 360i, showed that Yahoo’s market share among those advertisers stabilized after Panama launched, ending a steady decline for the past year. It also found that clickthrough rates improved since Panama’s launch, while cost-per-click has held steady.

With Yahoo’s new Quality Index, which ranks ads on several factors beyond just the per-click bid price. Marketers have been able to increase their rank with lower CPCs and higher clickthrough rates. This has been especially true for large consumer marketers with recognizable brands, according to Roger Barnette, president of SearchIgnite.

“Our large brand marketers saw the biggest impact of Yahoo’s Quality Index re-ranking, due to the relevance of their ads and their pre-existing brand prominence,” Barnette said.

The SearchIgnite/RBC report, entitled “Early Returns From Panama,” tracked more than 7.5 billion impressions and 85 million clicks across more than 500 marketers. It was compiled based on research conducted beginning in Q4 2006 and running through February 24, 2007. SearchIgnite plans to release quarterly reports on Panama, with the first one planned for April, reviewing full performance for Q1 2007.

In the short term, Panama has stopped Yahoo’s slide in market share, which had been dropping steadily among SearchIgnite clients over the past year, from 46.0 percent in the first quarter of 2006 to 19.6 percent in the fourth quarter. Panama’s repeated delays and the rise of MSN both contributed to that slide, Barnette said.

During the January transition period, Yahoo’s percentage of total paid search spend reached a low of 17 percent. Since Panama launched on February 5, it has held steady and risen slightly to 18.1 percent.

These early results should not be looked at as long-term indicators yet, since budgetary decisions by search marketers based on Panama results have not yet been made, or reflected in the report. The longer-term economic impact of Panama should begin to become apparent next quarter, Barnette said.

Early signs are positive for Yahoo, however. Among SearchIgnite clients, average clickthrough rates on Yahoo ads have increased by 22 percent since the fourth quarter of 2006, from 2.0 percent to 2.5 percent. During the same period, average CPCs rose only slightly, from $0.56 to $0.59. Barnette attributes the change to Yahoo’s Quality Index, which has allowed Yahoo to increase effective CPM (eCPM) by showing more relevant ads at the top of the page. Yahoo’s eCPM for SearchIgnite clients jumped from $11.20 in Q4 2006 to $14.50 after Panama’s release, he said.

Among SearchIgnite’s Fortune 500 brands, clickthrough rates rose significantly, from 2.3 percent pre-Panama to 4.4 percent after the platform’s launch, while CPCs have dropped 24 percent overall, from $0.75 to $0.57. The effect can be seen on brand terms, where previous competition with affiliates and aggregators may have driven up costs. On those terms, CPCs have fallen 24 percent, from $0.21 to $0.16. On non-brand terms, CPCs fell 20 percent, from $1.37 to $1.10.

In addition, ads from Fortune 500 marketers have seen an increase in average ranking for non-brand terms, from an average position of 6.2 to 3.7. Barnette said this is a result of their ads out-competing others on either relevancy or CTR, both factors that increase position in the new Quality Index algorithm.

Last week Avenue A | Razorfish published similar results for Yahoo search campaigns it manages. Among that agency’s clients, search impressions were up an average of 5 percent, cost per click (CPC) prices were down an average of 6 percent, with clickthrough rates up an average of 10 percent.

A longer version of this story can be found at SearchEngineWatch.