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Google Wants to be More Like Yahoo, and vice-versa

This is one of those things that makes you chuckle.

In determining which ads to serve, Yahoo’s model only considers the highest bids for that particular keyword. In other words, it’ s just a straight auction. Google, on the other hand, uses an algorithm that considers both the highest bid and the relevance of each ad to the content on the page. Rumor has it that Google also considers how much money the ad makes for Google.

According to Forbes Magazine’s Markets section, Yahoo is testing a new algorithm that takes it closer to Google’s way of thinking by ranking the ads by relevance as well as by bid price:

RBC analyst Jordan Rohan reports that Yahoo! has released a test version of its new search monetization in Scandinavia and will expand the rollout to the U.K. in July.

Codenamed “Project Panama,” Yahoo’s new model will be similar to that of Google (nasdaq: GOOG – news – people ), which ranks search-engine ads by both the amount advertisers pay for keywords and the relevance of the ad. The Google-like algorithm should result in higher click-through rates than its older model that ranked ads only by the amount paid for keywords.

Meanwhile, Google is introducing Position Preference, which gives the advertiser the ability to override Google’s default algorithm and choose your own position. In other words, if your bid puts you in position 1 and you want to be in position 3, Position Preference automagically lowers your bid so you end up in that position. In other words, counteracting the relevancy part of their algorithm and making it more like Yahoo’s.

Are you chuckling yet?

Then I was thinking Why did these guys do this? I found my answer on WebMasterWorld.com, but I should have figured it out myself:

there is a real danger that CPC prices will climb even higher when this launches. Does this mean that previous click thru rates and landing page relevancy importance are slightly diminished?

Will people with horrible click thru rates be able to obtain a #1 or #2 ranking just because they are willing to outspend advertisers who have worked hard and ‘followed the Google rules’?

Food for thought (wiped the smile right off my face).

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