Today’s announcement of the Microsoft-Yahoo! search deal is the official beginning of the end for Yahoo’s Panama search advertising platform. As part of the deal, Yahoo! has agreed to transition its advertiser base over to Microsoft’s AdCenter platform over the next year or so. This implies that Yahoo! will stop making any improvements to Panama and focus all of its technology resources on its APT display advertising platform.
How did Yahoo! get to this point? A variety of reasons:
- Once Panama was fully launched in Q1 of 2007, Yahoo! took its eyes off the ball and moved resources away from Panama. The initial launch was only supposed to be a starting point for a series of innovations and improvements over the ensuing quarters. With engineering resources shifted to build its display platform, Panama stagnated over the course of 2007 and fell far behind Google AdWords and Microsoft AdCenter.
- Yahoo! kept losing market share in search. No matter how well Panama worked (and it did work quite well), the market share losses on the audience side cancelled out the financial gains achieved through Panama. Over time, Yahoo’s search advertising offering became less and less important to search marketers due to its continuously shrinking relative query volume. As advertisers defected or focused their efforts more on their AdWords campaigns, it only exacerbated Yahoo’s problems.
- Yahoo! tried to do a deal with Google to make up for this deficiency. However, the deal fell through due to anti-trust concerns, with Microsoft cheer-leading hard against it.
So here we are, barely two and half years after the launch of Panama, and by all indications the platform will no longer be in existence by the end of 2010. Yahoo’s inability to commit to competing in search and failure to dedicate sufficient resources to its search products brought the company to this position. Now they’ve given up on search, taken the money from Microsoft, and effectively run from the market. What a shame.