Yahoo Unveils Personalized Ads
Tuesday, July 3, 2007
Let's say a 25-year-old man in San Francisco is shopping online for a hybrid car. Suddenly, a display ad for the Toyota Prius appears on the Web site he's viewing. The ad appears in colors known for grabbing the attention of men his age. The ad lists San Francisco prices and directs him to his nearest dealer for a test drive.
This is the future of Internet advertising.
In a bid to keep up with its competition, Yahoo yesterday launched a system to let marketers tailor advertising content to individual users, theoretically making the ads more effective and, therefore, more lucrative for Yahoo.
Behavioral targeting has been the focus for the Internet giants, many of which have offered large sums for online advertising firms that help track Web users' habits. This year, Google made a bid to purchase DoubleClick, Microsoft announced its plans to try to snap up aQuantive, and Yahoo bought Right Media.
Yahoo's advertising service, SmartAds, uses behavioral, demographic and geographic information to try to connect people with marketing that caters to their interests. Yahoo said it is its largest effort to cull information about its users.
In the case of the car shopper, the Web site took his age and sex from his account registration. The search engine identified that he was in the market for a hybrid. His weather channel settings alerted the system that he was probably a San Francisco resident.
Privacy advocates are wary of such systems.
"Personalization doesn't have to be an invasion of privacy if the user is in control of the information," but Yahoo could store the data for an indeterminate amount of time, said Ari Schwartz, deputy director of the Center for Democracy and Technology.
The new technology's proponents say it allows Web surfers to avoid a clutter of random ads. If the San Francisco resident starts checking the weather in Dallas, ads featuring Texas flights and hotel deals may appear -- an argument the company says makes the service useful to consumers.
"Consumers don't like ads that are irrelevant to them," said Dave Morgan, chairman of Tacoda, an advertising network that has used similar targeting methods for the past two years. "The only group that likes them less are advertisers that have to pay for them," he said.
In customized advertising, marketers provide Yahoo with artwork and audience research so that SmartAds can generate thousands of unique combinations, each adapted to a particular user. Yahoo will begin rolling out customized ads in phases, starting with travel.
Personalization can be costly for advertisers but is often more effective. In Yahoo's testing, users clicked on SmartAds two to three times more often than on static display ads in the same spot.
Yahoo, which recently restructured and replaced its chief executive, has been struggling to keep pace with Google's growth. Yahoo is currently No. 1 in the display-ad business, while Google leads in search-based ads.
"It's important for Yahoo to show that even though they haven't been able to wrestle much search ad money from Google, it's still innovating," said Andrew Frank, research vice president of Gartner in New York.
"The difference between the lowest-cost ads and highest-cost ads on the Internet can be 500 times the value," Frank said. The downside depends on how consumers feel about being tracked, he said. "I don't think people like the idea that they're being watched by Big Brother."