During a conference call to investors today, Yahoo talked about a new quality scoring system being introduced for its Panama search advertising platform on February 5, 2007.  Search Engine Watch has more details on the new system, including a press release from Yahoo and a brief interview with the company's Director of Public Relations.

In a nutshell, the new quality scoring system will bring Panama more into line with the approach Google takes to search advertising.  In the AdWords system, the decision to display an ad is based on the amount the advertiser has bid as well as the anticipated amount of money that Google will make the ad.  Higher quality ads illicit more clicks, and thus, make more money for the company.  Yahoo's quality index will apply the same principle to Panama.  Currently, ads in the Yahoo network are displayed solely based on bid amount.  Their relevancy and quality aren't factored into the equation.

Under the new system, Panama will look at the amount an advertiser has bid for the ad as well as the ads historical performance and likelihood of click-through to determine the order and placement of ads.  Yahoo hopes these changes will make ads more relevant… which should make both users and advertisers happier.  Users will enjoy the benefit of more relevant, quality advertising and advertisers will enjoy higher returns for better ads.

The company has obviously developed its own algorithm for Panama.  So it should be interesting to see how the February 5th change will affect things.  We'll have to wait and see how it goes.