Yahoo Panama ads charge by quality of ad audience

SAN FRANCISCO (Reuters) - Yahoo Inc. is introducing a new pricing feature for customers of its recently upgraded Web search advertising system that allows them to pay for online ads based on the quality of each site's audience.

The new pricing, one of the new features enabled by Yahoo's Panama pay-per-click advertising system, assesses the quality of a site publisher's traffic based on its capacity to attract customers highly valued by advertisers, Yahoo said on Monday.

Factors considered in quality-based pricing include publisher conversion rates -- how many customers click on ads -- and traffic source -- what sorts of sites did a user visit before landing on the publisher's own site.

Traffic quality has been one of the features that Yahoo's arch-rival in Web search, Google Inc., has used to differentiate its own market-leading Web search ad services.

Depending on the quality of a given publisher's traffic, the cost of an advertiser's click can be automatically discounted by a certain percentage, Yahoo said. Savings can be reinvested in more effective ad targeting campaigns.

"Quality-based pricing will help ensure that traffic from Yahoo's network is priced in a manner that is consistent with the quality it delivers to advertisers," Yahoo spokeswoman Gaude Lydia Paez said.

The quality-pricing push will be introduced in phases, beginning with a sampling of keyword search terms that advertisers rely upon to reach different audiences.