Yahoo PPC New Ranking Algorithm

Yahoo! is to start introducing a new ranking model to its paid search program (Yahoo! Search Marketing) in the US on 5 February 2007. This was announced yesterday on the YSM Blog.

Keyword Max CPC and ad quality will determine the ranking of an ad in search results. It means the current method, in which ads are ranked only by bid price will be replaced.

According to YSM, ad quality is determined by 2 factors:

  • The historical performance of your ad which includes its click-through rate (CTR) relative to competitors and normalized for position.
  • The expected performance of your ad which is determined by several relevance factors considered by YSM’s ranking algorithm, relative to other ads displayed at the same time.

Ad quality is believed to be similar to the quality score of Google Adwords, in which not only maximum cost-per-click, but click-through rate, keyword historical data and other factors are included in the determination of ad rankings.

Other major paid search providers including Msn Adcenter, Ask.com Sponsored Listings, and even China’s Baidu JingJia have all implemented quality score or at least CTR to the ranking algorithm before Yahoo!.

Ad quality, together with two other new features (multiple ad testing and geo-targeting) on the YSM new platform Panama, will expect the improvement of relevancy and quality of ads. This will then give better ads higher CTR and eventually eliminate the majority of bidding wars, in which in the past ads have been ranked solely by bid prices.

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