Content Matters

This week, Yahoo announced the launch of a new graphical ad format it calls SmartAds.  SmartAds look to blend behavioral targeting with geographic and demographic information.

What's unique about SmartAds is the technology platform behind them, for which Yahoo has applied for a patent.  SmartAds are template-based, so that an advertiser can assemble, on-the-fly, a "custom" ad based upon the user.  Depending upon the ad, there could be thousands of combinations fed through the template, so each user will receive what appears to be a custom ad.

For example, a user browsing pages about hybrid vehicles, who has selected San Jose as their default city for Yahoo! weather might see a SmartAd for the Toyota Prius, along with links to dealers in the San Jose area.

Yahoo has done limited testing of SmartAds on their FareChase portal, reporting click-through rates of 2-3x that of non-targeted display ads.  They will now roll out SmartAds across all Yahoo properties, and will also deliver them through the Right Media platform once that acquisition is finalized.

Behavioral advertising is not new.  TACODA and Revenue Science offer behavioral ad placement today, while e-commerce sites like Amazon deploy similar capabilities within their site.  However, the combination of demographic plus behavioral, driven by this template-based system could give Yahoo an advantage, at least in the near-term.

One short-term challenge, as Scott Karp points out, is that there are no ad agencies today which are ready to deliver ad materials with this level of complexity.  That said, I think that Yahoo will hand-hold the early adopters here and if they can show success, the agencies will adapt.  Even more interesting might be whether the political campaigns look to use SmartAds to do targeted advertising.  While serving up the wrong ad could backfire, few businesses leverage demographic targeting the way the campaigns do.

While Google continues to dominate the search advertising market, Yahoo remains a key player in display advertising.  While that market has been flat recently, Yahoo's hoping that SmartAds can drive new growth through improved relevancy and higher click-throughs.

For more insights on Yahoo SmartAds, check these posts from SearchEngineLand and ClickZ.