Analyst: Yahoo's Panama project making headway

Yahoo's new ad platform, dubbed Panama, appears to be making progress, according to a report by UBS analyst Benjamin Schachter.

In a research note, Schachter said "Yahoo is ramping up efforts to migrate advertisers to the new user interface (campaign management application). Contacts indicate that over the next few weeks more and more advertisers will migrate. There is even a Website to allow advertisers to request an early migration. However, as expected, the complete migration is still not scheduled to be complete until early '07."

The back story to Panama goes something like this: The project is designed to overhaul Yahoo's ad platform to close the performance gap with Google. In theory, closing that gap will allow Yahoo to better monetize its page views. Yahoo's latest stock swoon began two quarters ago when the company indicated its Panama launch would be delayed. In fact, the Panama delay is what triggered the latest consternation about Yahoo's standing against Google leading up to Saturday's crescendo over a memo from Yahoo exec Brad Garlinghouse. In the memo, Garlinghouse urged the company to revamp and refocus.

Schachter added that his channel checks are just one data point in Panama's progression and that there could be more hiccups before launch. He said that while converting advertisers to a new user interface is significant, Yahoo's next step--launching a new ad ranking system--will be crucial. In any case, Yahoo's monetization improvement isn't expected until after Panama goes live in early 2007.

Monday's news that Yahoo will partner with seven newspaper companies to distribute local content may be another feather in Panama's cap. "While nothing in the deal explicitly mentions Panama, we think signing the deal now demonstrates confidence in the new advertising platform," said Schachter in a separate note. "Clearly it shows that some content creators believe that Yahoo can compete favorably with Google and others to monetize traffic."