When Yahoo announced it was updating its new Panama search advertising system with relevancy scores, the company posted several advisories for advertisers telling them how the system would work and how it could impact the position of their advertisements.  Still, some advertisers were surprised when they suddenly found their ads, which used to rank high, being bumped down in the rankings.

In the old system, the bid price associated with keywords for an ad was the sole determining factor for how the ad ranked.  The ads with the highest bid appeared first… regardless of how relevant they were to the ascribed keyword.  Needless to say, the new system was designed to make sure the ads that would be most beneficial to users were displayed first.

Kevin Lee has written up an excellent analysis of how the system works.  It explains why some advertisers have seen their ads move up in the rankings while others have seem the drop.

At the conclusion of his analysis, Lee provides some suggestions for advertisers who want to see their ads move toward the higher end of the relevancy spectrum:

1. Ad group organization:  As Lee points out, Panama automatically created groups of ads based on shared copy when it was introduced.  But that group organization isn't fool-proof.  A better way to group ads could be by title or description.  He suggests avoiding the Dynamic Keyword Insertion tool to make sure keywords appear in your titles.  Do it yourself.  Come on.  You know how.
2. Testing:  The new system gives you the opportunity to test different titles and creative.  As we've said numerous times, testing is the key to determining what works best.  Take the time to create a couple of different versions of your ads and continue retooling them based on the results of your testing.  In time, you should be able to come up with a top performing version of all your ads.
3. Landing Pages:  So far, Yahoo hasn't started taking landing pages into affect when determining the relevancy score of an ad (Google does).  But as Lee points out, better landing pages mean more conversions… and more conversions mean more money to spend on higher bids.  It's all one big circle.
4. Bids:  If all else fails, think about raising your bid amounts.  It's important, however, to keep ROI in mind when raising bids.  If you're going to spend more money on an ad, make sure the traffic that results from it is worth the investment.  It's pointless to spend huge amounts of money on ads that don't convert well.

At some point it may become obvious that an ad just isn't performing well, regardless of what you do.  Don't be afraid to completely rework a campaign from the ground up… if that's what it's going to take.  So far Panama seems to be having a positive impact on a lot of advertisers.  If your ads aren't performing well it could be time for a "back to the drawing board" approach.

The key is to keep the average, Yahoo-searching user in mind.  What would they find relevant?  How does your product or service benefit someone searching for target keywords?  The more relevant your ad is to the searcher, the more relevant Yahoo should find it… and your rank will respond accordingly.