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Yahoo! Opens Panama Ad System Upgrade to Newcomers

Yahoo! said on Monday it is opening up its new advertising system for testing by newcomers and potential converts from rivals, marking progress in its long-awaited upgrade.

The search marketing software system, known by its code name "Panama," has been available since October to existing Yahoo! customers, and this week is being made available to new advertisers who sign up for a Yahoo! advertising account.

"In the past two months we have gotten nothing short of extraordinarily positive responses," Steve Mitgang, senior vice president of Yahoo!'s advertising products and platforms unit, said in a phone interview. "The reaction has been 'Wow!"'

Yahoo! is making a staged transition before it fully switches on the advertising system in the United States during the first quarter of 2007, giving existing customers time to adapt the new system to their own online ad buying plans.

"The systems are obviously at a level of scale, performance and stability we think we can take on all comers," Mitgang said.

Yahoo! is counting on its upgraded system to help the Sunnyvale, California-based company close the advertising effectiveness gap with rival Google, even as Microsoft gears up to offer its own ad system.

It is working through inviting hundreds of thousands of its existing ad customers to upgrade to use the new system.

"Many thousands" have already begun testing the system, said a spokeswoman, but she declined to give more precise figures.

This is the first major upgrade since Yahoo! acquired its existing search ad system from Overture in 2003. Delays in introducing the system been the primary contributor to a 32% decline in Yahoo! stock since the start of 2006.

Yahoo! is staggering the transition by country, with advertisers in the United States continuing to receive invitations to upgrade through the end of December and into the first quarter. Following the U.S. changeover, Yahoo! plans to expand the new ad system to work in international markets.

Project Panama offers advertisers improvements such as the ability to rotate different ads through the system to find the most effective ad mix, ad budgeting based on desired advertising outcomes and a way to test different keyword search terms for advertising effectiveness and geographic targeting.

"Before ad purchasing was based largely on price," said Charlene Li, an Internet analyst with Forrester Research. "It was hard to optimize the system."

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