Yahoo Retools Bidding Platform

NEW YORK Yahoo said it would migrate its U.S. search advertisers to its new ranking system on Feb. 5. The transition is a critical bet for Yahoo, which has fallen behind Google in the booming search marketing space. The key change for advertisers will be the new ranking methodology.

Under its current system, advertisers bidding the highest for terms are listed first when those words are searched. Its new platform takes a cue from Google by basing rank on a combination of the click price bid and its click rate, both past and expected. This means an ad with a lower bid price but higher click rate could rank higher.

Yahoo CEO Terry Semel said the "quality-focused ranking model" should "allow Yahoo to more effectively connect people with the businesses, products, services and information they are passionate about." Rehabbing its search ad system has been a top priority at Yahoo, as its previous one did not generate as much revenue as Google's.

Separately, Yahoo reported financial results that were dreary compared to the industry as a whole. Its revenue for the fourth quarter was $1.7 billion, up 13 percent from a year earlier. Net income was $268.7 million, down from $683.2 million in the fourth quarter of 2005.