Yahoo! gets smart about online ads

Yahoo! just upped the ante in the display advertising space.

It has launched a new display advertising product called SmartAds which allows marketers to offer ads that are customised based on the web surfer's age, gender, location and online activities.

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 colour targeted for women in her age range, as well as a Golden Gate Bridge logo.

Someone searching for flights between Dallas and Phoenix could be served an ad, for example, with specific up-to-the-minute fares from a particular airline along with a button that says "buy now", all within the ad, said a Yahoo! spokeswoman.

She said: "We do behavioural targeting now. This makes display [advertising] more of a direct response vehicle than just branding."

Yahoo! SmartAds combines Yahoo!'s demographic, geographic and behavioural targeting capabilities with a new patent-pending creative ad assembly platform that allows the company's ad system to create customised ads in real-time. Yahoo! will get different backgrounds, logos and other features from the creative agencies that can be reconfigured with ad copy based on who is seeing the ad and what they are interested in.

The company is launching ads with two of the three major airline companies as well as some travel aggregators, none of which wanted to be identified, according to the spokeswoman.

The ads will appear on Yahoo!'s network of publisher sites and will eventually be expanded to the newspapers Yahoo! has partnered with, as well as Yahoo! partners Comcast and eBay. Once Yahoo!'s purchase of online ad provider Right Media is completed, the companies will work to display the SmartAds on sites on Right Media's advertising network. Yahoo! has agreed to pay $680m for Right Media.

The move gives Yahoo!, already the leader in online display advertising, an added edge over competitors and could, eventually, help offset slowing growth in display advertising. Executives warned recently that second-quarter results would come in at the low end of guidance.

Yahoo!'s rivals aren't sitting still when it comes to display advertising. Google is buying online ad company DoubleClick for $3.1bn and Microsoft has agreed to pay $6bn for Aquantive.

Elinor Mills writes for CNET News.com