Yahoo Launches SmartAds

What happens when search ads and display ads are merged and you sprinkle in a bit of behavioral targeting? Apparently, you get click-thru rates two to three times higher than you do now. In fact, if Yahoo SmartAds work the way they're being hyped, you ought to be able to set up a campaign that will generate a targeted product ad based on your current sales price on the fly.

MediaPost Publications reports on the launch of Yahoo's SmartAds today:

The New York Times explains it this way:

The current system is limited to the travel verticals but Yahoo plans to quickly scale the offering to include automotive and retailers later this year.

According to The New York Times, the new system plans to be so robust that a user browsing the boxing schedule on Yahoo would not only receive an airline offer with a specific flight price for the date of the fight, but might even be able to complete their ticket purchase within the ad space without ever leaving the Yahoo page. Now that's some impressive technology.

The potential impact on online marketing is astounding. Search has long been touted as a key advertising realm because it's one of the few ways to meet Internet users as their point of interest. If you can offer up your ad for a local car dealership when someone in your geographic region searches for a new car, you've got a strong potential for conversion. That's left more traditional banner advertisements out in the cold in terms of targeting opportunity. Sure, you can make guesses about your audience based on the demographics of the site you are advertising on, but they're still guessing.

The new Yahoo! system demonstrates one of the benefits of building a content based community with so many personalized features that a user WANTS to log in. Get that user to log in and you suddenly have the ability to compile a large amount of information about them. Their gender, their age, their income level and their interests all at gathered up into a neat little database that suddenly allows Yahoo to serve up highly targeted advertising.

It will be interesting to see how accessible the system is as the program opens up down the road. Will the cost be high enough to prohibit positive ROI, thus blocking most small businesses from testing the waters? Will the creative prove too time consuming to create, leaving potential advertisers to rely on Yahoo to create their ads for them?

I also wonder (because I haven't seen this confirmed anywhere) whether the customized ads will only be available as traditional display ads, or if advertisers will also be able to take advantage of these behavior targeting features for paid search style ads.