Yahoo steps up fight for adverts with search engine revamp
Competition for businesses' internet advertising budgets is set to intensify with the imminent revamp of the UK search engine at Yahoo, the online media group.
UK paid-for search engine marketing is a £1.2bn industry, or twice as big as radio advertising. But marketers are concerned about lack of effective alternatives to Google, the runaway leader in selling search advertising.
Yahoo is close to switching its UK search advertisers to a system known as Panama in an attempt to win back internet users and close the gap in advertising revenue with Google.
Between September 2005 and March 2007, Google's share of UK internet searches rose from 65 per cent to 75 per cent, according to Comscore, the internet data measurement group. During the same period, Yahoo and other search engines lost ground.
Yahoo is overhauling its highest-bidder-wins system for auctioning advertising slots. The slots appear onscreen as sponsored search results whenever people search the web using particular words.
Yahoo will adopt "quality criteria", such as the ability of advertisers to convert people who click on their adverts into sales or registrations.
These criteria will be used, together with bid price, to determine which advertisers appear at the top of its sponsored search lists.
The Panama system will also enable advertisers to target campaigns to individual regions and to use many more copywriting variations of the same campaign to discover which works best.
Yahoo has written to advertisers about Panama's imminent UK launch. It has not confirmed a start date for the system, which is already used, in modified forms, in the US and Japan.
Yahoo says one result of its changes will be to enable smaller advertisers to compete against higher spending brands.
Richard Firminger, regional sales director northern Europe for Yahoo Search Marketing, said: "The current system encourages intense bidding. But the feedback is that people don't have the time to spend all day bidding. A hairdresser or a plumber can't be expected to be an auctioneer at the same time.
"If you are a small advertiser in a particular region, and focus on quality, you will be able to get results much higher up the sponsored rankings."
Some of the changes will bring Yahoo only up to the standard of other search engines. But media buyers believe that tailoring sponsored search results to the locality of users - including via mobile devices - offers a big commercial opportunity. In practice, it will rely on gaining accurate data from consenting users.
Google currently offers advertisers relatively crude geographical targeting and has less demographic information on its users than either Yahoo or Microsoft.
What makes consumers click
*UK expenditure on paid-for search (sponsored listings that advertisers pay for when a consumer clicks through to their site) rose by 52 per cent to £1.2bn in 2006. It accounts for an estimated 58 per cent of all UK internet advertising.
*Online classified advertising totalled an estimated £379m last year - less than 7 per cent of the £5.58bn spent last year on total UK classified advertising.
*In a recent marketing campaign, Ask, the number four UK search engine, used the term "sleep searching" for users who automatically resorted to the same search engine.
*Recruitment is the biggest category of online advertising in the UK, followed by finance, technology, automotive and entertainment. This contrasts with television where the advertising of packaged goods typically dominates.