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The delay was formally announced by Yahoo! chairman and CEO Terry Semel in a conference call with analysts to discuss the latest financial results. 'We think this is the right decision for ensuring the most successful commercial launch possible', he said adding that advertisers should pencil in the new system for the beginning of 2007.

The Yahoo! share price plunged by as much as 21 per cent to $25.38 on the Nasdaq on the news, down to a two

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year low. Investors took fright at the prospect that Yahoo!'s ad system will not be able to compete for the hearts and wallets of advertisers in the run up to this year's crucial Christmas buying period. Even more worrying is the concern that Yahoo!'s advertising system is being overtaken by Microsoft's new AdCenter software.

While the venerable Yahoo! ad system has had a number of upgrades, it lags way behind Google in its sophistication and feature set. At the moment, Yahoo Search Marketing places a paid ad solely based on the amount you are willing to pay for the keyword. Google uses both the price of the keyword and a quality score to rank the ad, on the grounds that a high bid price is no good if no one clicks on the ad.

Panama is also said to include a host of other new features such as the ability to crawl a site to collect potential keywords, the ability for advertisers to rotate in different creative units for the same keyword, a new ad control panel and improvements to monitor and forecast campaign results.