Search engine giant Yahoo announced on Tuesday it has upgraded its search advertising system yesterday after being delayed on several occasions, in an effort to catch up to Google in competing for online ad revenue.

Yahoo's search-engine upgrade is considered so significant to the company's future that the company's executives code-named it Panama, after the canal. The past few years have seen Google dominating the market for Internet ads, partly due to Google's more relevant technology, which led to more lucrative ads. This forced Yahoo and Microsoft's MSN to revamp their search engines to compete with Google's.

The Yahoo system upgrade required updating the engine that determines which "sponsored links" are placed at the top or to the right of its search results. Until yesterday, Yahoo ranked ads by highest bidder, causing the top results to not always being the most relevant ads. Yahoo will now rank ads similar to Google's practices, positioning ads based on both the bid price and measures of the relevance of the ad, such as a per-click basis.

The new engine will also allow Yahoo advertisers to target their campaigns by location of the Internet user and other demographic data, features that have previously been offered by the company's competitors. Yahoo says the company will not see the financial benefits from the new system until the second quarter, which ends June 30.