• by Shankar Gupta , March 5, 2007

Search advertisers using Yahoo's Panama upgrade have seen increases in click-through rates and decreases in cost-per-click, but a decrease in efficiency, according to data released by agency Avenue A | Razorfish.

Average click-through rates across Avenue A's 33 clients increased an average of 10% in the 10 days following Panama's release in early February, compared to the 10 days prior. Cost-per-click was down an average of 6% and search impressions were up an average of 5% over the same period.

But as cost-per-click and click-through rates increased, conversion rates decreased by an average of 5% in the 10 days following Panama's release. Overall, cost-per-acquisition increased 6% following the release of the upgrade--which, among other features, takes into account relevance when choosing which ads to display.

Last week, comScore Networks also reported an increase in click-through rates: A week after Panama launched on Feb. 5, sponsored search ads on Yahoo saw a 5% increase in click-through rate over the week ending on Feb. 4. The week ending Feb. 18 saw click-through rates up 9% from the rates the week before Panama's launch, comScore reported.

Also this month, research firm UBS released a report predicting that Yahoo's search revenue could grow 45% on the strength of the Panama update, assuming that the rate of search volume continued to grow, and that the engine's click-through rate on sponsored links increased at least 8%--which both comScore and Avenue A's data indicates has happened.