Posted February 5, 2007 3:46 am by with 7 comments

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Monday February 5th, 2007, will be a day that goes down in search engine history. At 3pm PST today, Yahoo will bring together 30 to 40 engineers and start migrating the old Overture pay-per-click platform over to the new “Panama” model. Its future success or failure will depend on how well the new platform is received.

Thousands of advertisers, and billions of dollars in ad spending, will be watched closely, as Yahoo finally moves from the pure “highest bidder wins” model, to the “bid plus quality” model. By making this switch, Yahoo hopes to increase the average revenue per click from 2.5/3 cents to something closer to Google’s 4.5/5 cents.

As successful switch could mean the difference between Yahoo’s road to a comeback, or instead, further languishing behind Google – and facing a strong challenge from Microsoft’s adCenter.

There’s certainly a lot at stake. Not only does the new Panama platform bring a better opportunity for Yahoo to build market-share now, but as the New York Times explains, it’s a solid platform that can help Yahoo grow.

Yahoo says the system can be upgraded without disrupting it. It is intended to be flexible enough eventually to handle video and audio ads and to distribute ads to mobile devices. And while Yahoo gives few specifics, it says Panama will some day play a role beyond search advertising.

The full roll-out of the new platform is not expected to be completed until sometime in March and Yahoo warns investors not to look for any bottom-line impact until later in the year – as advertisers get used to the new bidding system. Still, having spent a lot of time speaking with the people behind Yahoo’s new platform build, I’m very confident that Panama will be a huge success for the company. Will it see Yahoo catch Google in terms of ad revenue? Doubtful. It will, however, give them an opportunity to better monetize the advertisers they have and should help them steal a few more away from their rivals.

If you’re a Yahoo employee, cross your fingers and grab your lucky rabbit’s foot. Today is a big day in Yahoo’s history.