We’ve known for some time, based on a number of studies from Microsoft, Yahoo, SEM firms and ad networks, that an online ad campaign that includes both display and search performs better than one that features only display or search. In another version of that same theme, Yahoo recently said that it was using search queries as part of its larger behavioral targeting efforts across its display network. In other words, search queries become part of the targeting data that inform what display ads are shown to users thereafter.

Display advertising has been battered in this recession despite plenty of empirical evidence that it works as a branding medium and as a stimulus for search behavior. Behavioral targeting (BT) has been the subject of a great deal of focus over the past two or so years as a way to revive display advertising by boosting its performance. Yahoo is one of the big practitioners of BT and is arguing that it is starting to see search-like performance from some of its display campaigns.

Those campaigns are using all the complex layers of targeting that Yahoo offers (geo, BT, demo). In addition, the company is presenting different creative elements and copy to users in the context of that targeting through its dynamic SmartAds platform. SmartAds was launched in 2007 originally. At the time it launched I wrote about it:

Yahoo has been offering these various flavors of targeting, including behavioral targeting, for some time. The really new thing about SmartAds is the “creative assembly platform,” for which Yahoo has applied for a patent. The idea, according to Paez, is to take “templates” of advertiser-generated creative (e.g., copy, logos, graphics) and assemble those elements dynamically depending on the targeting opportunity. An 18-year-old woman in New England looking for hybrid vehicles, for example, might see a different ad from the same marketer than a 50-year-old male in Texas.

It’s really a form of quasi-real time multivariate testing (if that makes sense). As indicated, the Yahoo Search Marketing blog reports that SmartAds see search-level ROI:

So far, advertisers testing Smart Ads have seen significantly improved campaign performance based on a variety of metrics, including click performance, conversion and overall return on investment.

For example, after executing several Smart Ad campaigns with Yahoo! and its partners, Hewlett-Packard saw a return on ad spend that was more than 20 times higher than their traditional display campaigns, and on par with their search marketing campaigns.

Yahoo is now starting to bring third parties into the SmartAds program as part of its larger YOS initiative:

The program now helps deliver Smart Ads at greater scale by combining Yahoo!’s reach and user knowledge with innovative ad-serving technology from third-party providers. Smart Ads is an open platform, but Yahoo! is initially working with two partners, Teracent and Tumri, to make Smart Ads available to PC and mobile advertisers.

Accordingly Yahoo’s SmartAds also extends to mobile, where dynamic ad serving and changing creative based on location and other variables are actually critical to realize the “LBS opportunity.” As I wrote on the Local Mobile Search blog:

Agencies and marketers can’t create 300 separate ad units for every major city and ad copy permutation. Thus being able to deliver the right ad with the right copy on the fly is critical to creating the “inventory” required to capitalize on LBS whether online or, even more importantly, in mobile.

Though there are potential privacy issues that loom on the horizon for BT and the advanced targeting methodologies that SmartAds embody, it represents the future for both online and mobile display advertising.

At various times it’s been called AMP or APEX, but today Yahoo introduced its new “unified digital advertising platform,” which the company is now calling APT. With the platform it gained through the Right Media acquisition at its core, Yahoo is positioning APT as a dynamic, open marketplace (dispensing with the term “exchange”).

The central idea is very simple: simplification of buying and selling advertising across the internet. The first customers — indeed the apparent drivers of the initiative — are Yahoo’s newspaper partners.

Search is not a part of APT at this point. But previously Yahoo President Sue Decker said that it would encompass all ad types and formats across Yahoo and its partner network: We are building a cutting edge ad platform that runs across all formats, whether it is search, display, video. It is capable of harnessing the power of Yahoo and the power off Yahoo. But it will also take advantage of emerging formats like mobile, all in an easy to use system.

APT was formally unveiled in New York today, with an appearance by Jon Hamm, the actor who plays advertising executive Don Draper on the popular AMC show Mad Men. Lots of sweeping and dramatic claims are being made for APT and how it will affect online advertising.

Yahoo CEO Jerry Yang blogged about the launch:

Our confidence in APT’s ability to transform the marketplace isn’t based on theory or conjecture. It’s because of the feedback we’ve been hearing from partners who have been working with us side-by-side as we developed and then began testing the platform. In fact, William Dean Singleton, CEO of Media News Group (parent company of the San Jose Mercury News), also joined us on stage today, using words like “extraordinary and “sea-change” to describe how APT will take MNG into the future.

Yang characterized it as a “platform that would be to 2009 what radio was to 1924, TV to 1947, color TV to 1965, and the Internet to 1993.”

Google, AOL and Microsoft all have their own “next generation” ad platforms in the works or various stages of development. For example, just yesterday AOL announced its own: BidPlace.

Clearly APT is consistent with what advertisers, agencies and publishers want: reach, targeting and simplification. But we’ll get to see in the coming months whether it can deliver for them — and for Yahoo.

Yahoo has announced that they will begin giving their users the ability to opt-out of customized advertising on Yahoo.com. The feature will be added to the Yahoo privacy center by the end of August.

This is an expansion of Yahoo’s opt-out program for third-party networks. This was done in response to the inquiry by the House Energy and Commerce Committee. You can read a bit more about that over here.

In articles on the NY Times and Wall Street Journal sites this morning, more details are surfacing about the intended Q3 rollout of Yahoo’s new ambitious, integrated ad platform — what President Sue Decker previously called “APEX” (advertiser-publisher exchange) and is now apparently being called “AMP.”

The idea is to allow Yahoo and its partners — initially the members of the newspaper consortium — to sell ads on each others’ sites and throughout the network. The ads will at first be CPM-based graphical ads. Eventually the system will encompass the full range of ad types and formats, including video, search, and mobile advertising. It will also bring the full range of targeting capabilities to marketers across those formats and participating properties.

According to the WSJ:

Yahoo executives said they expected to begin releasing AMP in the third quarter for use by newspaper companies that are part of an existing Yahoo ad-sales consortium, and eventually extend it to additional Web publishers, advertisers, agencies and online-ad networks. The company said the system, in a future stage, will handle ad types besides display, such as search, mobile and video.

With the AMP system, Web publishers are expected to be able to manage the ads on their sites, as well as sell ads on behalf of other participants in exchange for a commission. Advertisers could buy online ads across a range of sites using standardized geographic, demographic and other targeting.

The AMP platform capabilities and vision are impressive. However, lurking in the background is the proposed acquisition of Yahoo by Microsoft. My sense is that Microsoft very much believes that AdCenter is superior to Panama and is likely to be equally skeptical about the claims regarding the new platform. If the merger happens, therefore, it casts doubt on whether Yahoo will ever be fully “AMP’d.”

At the IAB conference in Phoenix on Monday, Yahoo President Sue Decker made some tantalizing allusions to a new ad platform called “Apex.” According to the NY Times, this stands for “advertiser publisher exchange.”

Perhaps analogous to AOL’s Platform A effort, it attempts to knit all of Yahoo’s recent acquisitions and ad network properties together (e.g., RightMedia, Blue Lithium). The Times quotes Decker on the potential capabilities and intention behind the platform:

We are building a cutting edge ad platform that runs across all formats, whether it is search, display, video. It is capable of harnessing the power of Yahoo and the power off Yahoo. But it will also take advantage of emerging formats like mobile, all in an easy to use system.

I would imagine this is more conceptual than real at this point. Certainly this sort of simplified ad buying across the Yahoo network, and third party sites, would be welcomed by marketers. It’s an impressive and ambitious program.

If Microsoft succeeds in acquiring Yahoo, however, it’s unlikely that Apex will come to fruition.

This afternoon Yahoo announced that it was buying US-based ad network BlueLithium for $300 million in cash. Founded in 2004, the company has 10 offices globally and claims more unique US visitors than Google, MSN, AOL and eBay. It also claims to be the fifth largest US ad network and the second largest in the UK.

It’s part of Yahoo’s push to create “the largest and most effective online ad network globally.” That network includes the recently acquired RightMedia Exchange. The company will apparently operate as a wholly owned subsidiary of Yahoo and will report into Hilary Schneider’s new organization.

Most of what BlueLithium does is behavioral or demographic targeting, which has recently seen a big push by Yahoo via its new SmartAds platform. This acquisition can be seen as partly defensive and partly offensive in an effort to retain brand advertisers that have more choices today and to build out a broad and efficient online ad network that offers huge reach (incl. beyond Yahoo), as well as targeting and search.

Not long ago AOL acquired BT ad network Tacoda.

The Wall Street Journal explores Yahoo’s recently debuted “SmartAds” (prior coverage here), which mix behavioral targeting with other forms of targeting and dynamic elements to deliver a reportedly better response to display advertisers. The new ad platform was tested in Yahoo Travel and reportedly performed well (2x to 3x CTRs of normal display ads) and will be rolled out to other areas of the Yahoo site over time.

From the WSJ article:

Using SmartAds, advertisers provide Yahoo with sets of backgrounds, images and text that can be mixed and matched on the fly to create an all but unlimited number of different ads. The approach combines technologies Yahoo developed itself with others it acquired. Bringing together this creative zip with the ability to target users based on interest and location, brings to display advertising the flexibility and direct-response qualities that have fueled the boom in search advertising. Yahoo hopes SmartAds will help it gain ground in the rapidly expanding market for behaviorally targeted ads, which is expected to jump to $1 billion in the U.S. in 2008 from $575 million this year, according to eMarketer.

Yahoo recently consolidated search and display advertising under David Karnstedt, who runs North American ad sales at Yahoo. The company also recently released research showing a lift when search and display ads are used together as part of an online ad campaign.

The “creative assembly platform” described in the article excerpt above is perhaps the most interesting aspect of SmartAds. But behavioral targeting, which is the current rage in online advertising (AOL recently bought Tacoda), is gaining new scrutiny even as its stock is rising. In November, the U.S. US Federal Trade Commission is holding a forum in Washington, DC to address consumer and privacy groups’ concerns “raised by the practice of tracking consumers’ activities online to target advertising.”

Yahoo is introducing new SmartAds that deliver display ads to people across the web based on their demographic and geographic profiles, plus search and web browsing behaviors. These ads represent the future of graphical advertising at Yahoo, according to Gaude Lydia Paez, director of corporate communications at Yahoo.

SmartAds have been successfully tested over the past four to five months in the travel category, and they will eventually roll out across the larger Yahoo network and ultimately on RightMedia and other partner sites.

While SmartAds won’t replace pure branding in all circumstances, they will provide brand and display advertisers with the option to target audiences based on demographic, geographic or behavioral profiles – or a mix of all three.

Yahoo has been offering these various flavors of targeting, including behavioral targeting, for some time. The really new thing about SmartAds is the "creative assembly platform," for which Yahoo has applied for a patent. The idea, according to Paez, is to take "templates" of advertiser-generated creative (e.g., copy, logos, graphics) and assemble those elements dynamically depending on the targeting opportunity. An 18-year-old woman in New England looking for hybrid vehicles, for example, might see a different ad from the same marketer than a 50-year-old male in Texas.

Yahoo can also take offers or inventory feeds and present "the right offer at the right time" via SmartAds, Paez said. Accordingly, it can make graphical advertising and branding perform much more like direct response and search. It offers something of a cure for so-called "banner blindness." (See, for example, "Marketers Seek a Banner-Blindness Cure," from the Wall Street Journal).

When questioned about how personal this ad platform could get, Paez was careful to stress Yahoo’s privacy policy and explain that users are grouped into categories and subcategories but not individually targeted. A range of behaviors, including search queries, are factored into the determination of what ads are served to what users.

As a practical matter, Paez also emphasized, marketers want large audience segments and if those audiences are "too thinly sliced," they’re not going to be interested. But SmartAds effectively allows brand marketers to target the head and the tail more efficiently. Paez added that Yahoo hoped direct response marketers would also be attracted to the new offering because of combination of branding and direct response elements.

Microsoft currently offers geographic, demographic and behavioral targeting, but the "creative assembly platform" component of Yahoo SmartAds is unique. Google offers various targeting options, though not behavioral targeting currently. However, through search personalization and other efforts, it can reasonably be expected that Google will eventually introduce some form of behavioral targeting.