(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)