(My initial title for this post was “Yahoo Panama Working?” I just changed it to “YHOO is a SCREAMING BUY!” after I did some quick number crunching.)

Ran across this press release from Comscore which claims Yahoo! Sponsored Search Ads
Click-Through Rate increase 5% and to 9% in the last few weeks.

Using the week ending February 4, 2007 as a baseline for sponsored search click-through rates (i.e. total clicks on sponsored search ads divided by total searches) before the ranking model launched, comScore studied the two subsequent weeks of click-through data to evaluate the impact of the new ranking model. comScore’s data indicate that for each of the two weeks subsequent to the launch (ending February 11, 2007 and February 18, 2007), Yahoo! Sites experienced a noticeable lift in its sponsored search click-through rate. The week .ending February 11 saw a 5-percent increase, while the week ending February 18 showed a 9-percent jump.

Furthermore,

Another anticipated result of Yahoo!’s new ranking model is a shift in composition of total click volume from algorithmic to sponsored. The “sponsored click composition” metric (i.e. sponsored clicks as a percentage of total clicks) is critical in understanding Yahoo!’s success in improving both monetization and user experience. qSearch data show positive gains in this area, with sponsored clicks representing 10.6 percent and 11.1 percent of total click volume in the weeks ending February 11 and February 18, respectively. These data represent increases of 0.5 and 1.0 points in the weeks following the new ranking model launch.

So the good news first. . . it appears that CRT for sponsored search results almost doubled WITHOUT take significant share away from algorithmic/natural search results.

Let me do some simple math to confirm. . .

PANAMA Week I

.106 = sponsored clicks / click
+.05 = sponsored clicks / search query

+.05/.106 = Incremental 0.49 total clicks per query

PANAMA Week II

.111 = sponsored clicks / click
+.04 = sponsored clicks / search query (.09-.05=.4)

+.0.4/.111 -> Incremental .36 total clicks per query

So in two weeks, the clicks per query has increase by a total .85 clicks.

To give some background, total clicks per query can approximate to quality of the results (not globally especially when the # is large it might actually point to having bad results, but its safe to assume that we are at a local optimal since Yahoo does have a decent search engine). Futhermore, the rule of thumb is that in general search engines generate 2 clicks per query. To increase clicks per query by close to 50% is freaking amazing.

Even more importantly, I was afraid that sponsored ads was taking click throughs AWAY from organic results which would mean that the effect is short lived and that the numbers would point to LONG TERM dissatisfaction with Yahoo’s organic search algorithm.

BUT to my amazement, the total # of clicks per query has increased showing that overall clicks per query has increased significantly thus organic search clickthrough has maintained (or even improved) because of the change in sponsored search algorithm (aka Panama).

These are all great news for Yahoo. I’m gonna put some money in YHOO now. . .

(CAVEAT, I’ve NEVER made ANY money in stock investments so dont listen to my ramblings)

A friend asked me what MyBlogLog was and I said

“Its like a group of guys standing in a circle patting each other on the ass”

MyBlogLog was a brilliant idea that both People Aggregator other social networking “aggregators” should have been. A clear case where one entreprenuer was very in touch of its target customers while the others fell in love with his vision instead; the others forgot how to serve the mindset/need of the target market. Unfortunately it is also because MyBlogLog brilliantly exploited this desire for peer validation from bloggers that MyBlogLog often annoyingly degenerats into quite a self-congratulatory and incestuous circle #$*%. In the end though, $10M seems like too low a price to sell one of the best concepts of 2006. (yes, despite my snarky comment, I think the site is brilliantly executed)

Been meaning to do this for a long time but Shri beat me to it. She set up a ebay blogger wiki directory where past and present ebay bloggers can list and discover each other’s blogs. I also replicated it on my side bar as a seperate blogroll so my readers can find them. In fact I encourage everyone to take a quick stroll. I’ll put the eBay lineup up against the best bloggers Yahoo, Google, or MSFT can throw together (plus many of their bloggers gets paid to blog. . . glorified PR people . . . we, instead, blog secretively between meetings, hoping not to get caught)

When I started working at eBay there were only a handfull of bloggers, now there are significantly more. . . (the wiki will prbably double in short order as the word spread) . . . I remember being scared shitless that PR might fire me or ask me to shut down my blog. In fact Shri (as my boss) was the first eBay person to ever discover it . . . and she was nice enough to keep it on the down low . . .

Zlango just announced money from major hitters today - Benchmark and Accel. I would like to pretend that I’m cool and in with the crowd but I dont get it . . . I would like to think that if one of these stuffy old guys would “get it”, it would be me. But nope, not me . . . I see that its fun, but I cant wrap my heads around $12M or an NPV model that justify the pre-money.

Back in the pager days I used pager codes. I used to type in alternating caps. I used to replace all my “s’s” with “z’s.” I had a low hundred digit ICQ account (probably by coincidence). I love my emoticons. I was on Asian Avenue before Tom ripped it off to create myspace.

still . . . I dont get it. . . and it scares me. These guys are smart, they are Israeli, they have to be . . . Benchmark and Accel are the best. Today, for the first time in my life, I feel too old rather than too young . . . (I’m still waiting on feeling just right). . . . I’m gonna go feed my neopet now . . .

It is well known that the advertising industry has a high Beta compared to the general economy. In short, the industry does very well during good times and very bad during bad times. There are several reasons to this, when the economy does well 1) companies forgo ROI for marketshare 2) companies believes advertising is a capital expenditure to build brand equity 3) keeping up with the jones, as advertising effectiveness is extremely sensitive to competitive spend. It is not to say these reasons are not rational, they are somewhat. But that the industry tends to go in boom and bust cycles because of them.

Google’s is in this very cyclical industry . . . so much so that the offline equivalent of ad brokers (agencies) are mostly private shops or loose but public cooperatives/roll ups to even out the cyclicality. Furthermore, Google has one large issue. . . that like the Real Estate bubble in Hong Kong in the mid 90’s, much of the spending on Adwords has been done by speculators trying to arbitrage traffic/eyeballs rather than companies productively selling a service or product.

For the past months, I’ve been tracking (unscientifically) the percent of adword advertisers with the main business model of advertising. In short, instead of selling shoes or providing a service (like translation or loan brokerage), these sites are simply trying to pay for eyeball on Google and hoping to make more than they spend on getting that visit (or visitor if the site is sticky enough). Even worse, some of these companies are venture funded so they are simply looking at whether the cost of that visit will get them an equivalent increase in VALUATION. They dont mind losing money, as long as they can flip the company to someone else in the short term.

In decemenber I tracked about 200 queries and found that about 20% of adword advertisers are arbitragers. Early this week, that # has gone up to about 35%. Again this is about unscientific as it gets and I hope some research analyst will start tracking this metric sytematically.

But I think the point is made that increasingly the revenue growth google is able to capture are significantly more risky than before. Google’s revenue beta is becoming higher and Wall Street has yet to take that into consideration. Remember back in the dot com days, all the venture money raised was poured into buying Sun hardware. when the bubble collapsed, so did Sun. Today, because the lower cost of infrastructure, this money has been poured into advertising and marketing instead (specifically into Google with a disproportionate share). If (when?) the battle for traffic is over and the casualties emerge, a significant portion of Google’s advertiers (and corresponding revenue) will also go the way of a server spending on Solaris machines . . .

But like a game of chicken, advertising spend usually drop off the cliff rather than decelerate, so there will be little to no warning when it does happen.

When I’m short on time to blog I create lists . . . (which blogger doesn’t love lists) . Today’s list is top ten reasons you are not a blogger anymore.

10. You think your (link) juice is too precious to share

9. You think about your (link) juice at all!

8. You get worked up if you are not getting your share of “hat tips”

7. You scramble to trackback to bunch of random blog you see on Techmeme so you can appear (spam) on Techmeme under the same heading

6. You joined FM publishing

5. You comment on every damn post on Techcrunch in hopes of getting some residual traffic

4. You are franchising your “brand”

3. You have a brand

2. You have blog-enemies that turn into real-enemies

1. You create lists cause you ran out of shit to blog about

Online forums around brands (aka fan sites) - everything from Tyra Banks to Bratz are big business. Anyone that has searched for information on google or yahoo will realize that forums represents a disproportionate portion of the search results due to the large amount of dynamic & fresh content generated. All if not most are moneitzed through YPN or Adsense - Google ’s Adsense is generating around $4B a year for Google and probably $8-$12B in total for millions of webmasters. To realize how big this “digital underground” is all we need to do is to take a stroll on sitepoint or webmasterworld. (Monetizing the longtail of websites if you well!)

Foremanski has some good comments from the business perspective.

There is, however, something more going on here from search marketing perspective. . .

1. Yahoo can give preferential treatment to these sites over independent fan sites and forums. Try a Maria Carey search on Yahoo and you will notice the Yahoo Artist page as the top result. This will happen to a lot of top search terms going forward.

2. Even Google will give these sites higher rank compared to independent sites because they are hosted on a yahoo domain which has high PageRank (wii.yahoo.com for example)

3. Having the search term in the subdomain (wii.yahoo.com) could potentially increase search ranking as well (somewhat debatable)

4. Conversely, this could be considered a form of cyber squatting (a subset of the copyright issue widely mentioned) given the brand name in the subdomain

5. Yahoo will for sure expand this down its list of search terms and eventually extract more and more value and advertising dollars from webmasters who runs these fan sites and forums.

Time will tell but this could be a turning point for the large community of niche sites having their way until recently on drawing internet traffic away from larger commercial website. . . Yahoo is fighting back and so are other media companies (note the recent spat of “social networking” initiatives from media companies)