Yahoo Rolls Out Next Generation of Customizable Ads

As reported by the New York Times, Yahoo Inc. is firing the next salvo in the online advertising wars by announcing the debut of SmartAds, a tool designed to create ads customized to a person’s age, gender, location, income level, and previous online activity.

SmartAds is being utilized through Yahoo’s April 2007 $680 million purchase, Right Media, which seeks to establish a competitive advantage over rivals DoubleClick, bought by Google for $3.1 billion, and Aquantive, courted by Microsoft to the tune of $6 billion. Such numbers don’t seem absurd in light of predictions that the market for targeted ads is expected to double to $1 billion in 2008 and increase to $3.1 billion by 2011. Although the market for display advertising is slowing, Yahoo is looking to inject some life into the market and its competition with Google with SmartAd’s release.

Despite being the leader in online display advertising, Yahoo is struggling to reverse a slowdown in revenue growth and a slide in stock prices after losing the search and advertising race with Google, not to mention a transition in executive leadership. SmartAds should give Yahoo the means to weather this storm, as well as an additional competitve edge.

In this new system, the advertiser (or agency) gives the text and visual components of the ad and access to its inventory to Yahoo, which then combines this information with its demographic, geographic, and online history data. This allows the promotion of products that are being sold from local retailers, making the ads much more relevant to viewers. Elinor Mills at gives an example of the new system in action:

“For instance, instead of just seeing a generic ad for a Toyota Prius, a woman in San Francisco who conducts research on hybrid cars on Yahoo Autos could be served an ad for a local San Francisco dealer with information on the types of Priuses that are in stock and the purchase price. The ad, which is configured on the fly, could also feature a background color targeted for women in her age range, as well as a Golden Gate Bridge logo.”

Yahoo has already sealed agreements with two of the three major airlines, as well as several travel agencies, none of whom agreed to be identified. SmartAds is being tested on Yahoo’s network of sites, its local newspaper online holdings, and Ebay. The main issue with display advertising has been its inability to target specific individuals with tailored ads, instead relying mostly on brand marketing. While SmartAds is by no means the solution, it is a step in the right direction for Yahoo to begin narrowing both its ads target audience and its distance to Google.

 UPDATE from the Editor:  Gaude Paez at Yahoo sent me an email to clarify that Yahoo is “only serving Smart Ads on its owned and operated properties.  That said, our goal is to extend it to our off-network partner sites and to the Right Media exchange in the future.”  So, our mistake, Yahoo is not yet using Smart Ads with Right Media, but hopefully will soon.

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