Planning for Yahoo's Panama, Part 1

Are you ready for Yahoo’s Panama update?

Yahoo’s been promising a major overhaul of the Direct Traffic Center (DTC) and its paid placement algorithms for well over a year now. The investment community has been impatient with Yahoo because Panama promises to bring to the company a more efficient paid placement marketplace. This translates into more dollars earned per search, on average. The additional dollars earned under Panama will, of course, come out of we advertisers’ pockets. If there’s additional value in that marketplace, we’ll be more than happy to invest in the kinds of clicks that drive our businesses forward.

Today, I’ll review the features and changes Yahoo’s including in the Panama update. Along with each feature and change, I’ll review some homework assignments you may want to try to prepare for Panama.

Yahoo’s trying to accomplish several things with Panama, and advertisers will benefit from some of the changes, particularly educated, prepared marketers. Clearly, some enhancements in Panama were added as part of a foundation shift that will make more advertising options likely to appear within the DTC over the next months and years.

Based on what I’ve heard from marketers and advertisers at Search Engine Strategies and in direct conversations, there’s a lot of apprehension about Panama at the tactical level. The shortage of good SEM (define) tacticians means everyone’s already working long hours to keep current campaigns humming in at least three engines and as many as six or seven (when the second-tier engines are tallied). Search engine marketers often complain they can’t even get enough resources for creative and landing page testing. So any outcome from the Panama update will be on top of the current workload.

At management levels, the concern isn’t so much workload as it is loss of transparency. Yahoo was the only transparent search auction. Some marketers like the level of control a transparent auction provides. However, Google, MSN, Ask, and others have all adopted a relevance factor on top of bid price, and the marketplace has clearly demonstrated relevance factors are a good thing.

There are two phases of the Panama update. The first is a change to the DTC that includes structural and targeting changes, but no change in the paid placement auction system we’ve come to know and love (or hate, depending on your perspective). The good news is if you do nothing at all to prepare for Panama, you’ll still be OK. Nothing will break; no campaigns will go offline (unless there’s an unforeseen bug). Yahoo planned the transition to include an option in which the advertiser sticks with all current campaigns: same keywords, same structure, same titles and descriptions, same everything. Clearly, bids will likely change, but bids change regularly under the existing system.

Although no dates are locked down, other than the fourth quarter for phase one of Panama and a likely release of phase two in early 2007, Yahoo promises to give advertisers at least two weeks’ notice before accounts are migrated to the new system. The key is to be prepared for the migration. While we all have the option of running with a campaign that was migrated in an unchanged format, there are clear benefits to the new system, some of which can be realized before the phase two algorithmic change is implemented.

Phase one of Panama is an updated DTC that allows for a more flexible Ad Group structure, permitting a single creative (or group of creative units) to be shared by a basket of keywords. Yahoo even goes as far as to expand the targeting definition beyond keywords to reflect that the DTC (like Google and MSN) is evolving beyond search. Yahoo calls the keywords “targets” in one presentation, but in the DTC they’re still called “keywords” within the publicly shared tabs, so there’s no need to start freaking out yet. When one thinks about marketing, much non-search marketing is really about reaching a target market: home buyers, music enthusiasts, in-market auto buyers, new moms, and so forth.

Another new feature that will be immediately handy for some marketers (particularly smaller ones without access to advanced campaign management software) is better budgeting control. Yahoo will allow budget control (spend caps) at both the account and the campaign level, making it easier to allocate a specific budget to a test (a creative or elasticity test, for example).

Next, I’ll cover more specifics of both phases of the Panama rollout. In the meantime, take a close look at your current Yahoo campaign and start thinking of it more as if it were a Google or MSN campaign. What would you change, and what would you keep the same? You may also want to allocate some human resources during Q4 and early next year to make sure you’re taking advantage of all the new features and options Yahoo will roll out.

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