Yahoo has released a new paid search ranking algorithm. The new one mimics Google Adwords, by ranking ads, not just according to bid amount, but also by:

– Ad quality.

– Click through rate.

They still aren’t ranking according to landing page quality, but I have high hopes for this new model. It’ll shift the balance back towards folks who are taking the time to write and test great ad copy. It’ll also slow bid inflation, which is a huge problem.

But the proof is in the pudding. So, I tracked performance of 10 ads we’re running for various clients.

Last week, their average rank was 4 (meaning they were in the 4th position in the sponsored links) because I was bidding for that position. They had an average clickthru rate of 4% (meaning that 4 out of 100 people who saw the ads clicked on them).

As of 6 PM this evening, their average rank is 2.

It’s only been a few hours since Panama launched, so we’ll see, but so far it looks like Yahoo is heavily weighting ad quality. If you want to capitalize, focus on writing and testing ads, and on really compelling ad copy. Make sure that the keywords on which you’re bidding also show up in your ad. And keep an eye on ad performance…

Other articles in this series:

Yahoo’s Panama, Day 2

Review of Yahoo’s Panama: The First Week