Yahoo 'Opens Up' SmartAds; Dynamic Ads Key to LBS

Yahoo announced that it was going to incorporate third party ad technologies into its dynamic "Smart Ads" platform. The first two partners are Teracent and Tumri. As explained in the press release:

Yahoo!`s new Smart Ads program will help marketers to develop Smart Ad campaigns quickly and execute them at scale across personal computers and mobile phones in North America. Yahoo! will consider expanding the program to international markets in the future.

Smart Ad campaigns use ad-optimization technology to create a near-limitless variety of creative executions through a combination of offers, colors, images and messaging in real time. These combinations can be finely tuned to match customized messages with users, helping marketers to find the right ad for the right set of users and the right time. Testing of this initiative has already helped advertisers significantly improve campaign performance based on a variety of metrics, including click performance, conversion and overall return on investment.

For example, Yahoo! and Tumri worked with Hewlett-Packard to create a Smart Ad campaign that generated more than 20,000 unique creative experiences, reaching more than 140 million US users. This campaign documented a return on ad spend that was more than 20 times higher than their traditional display campaigns. HP has developed separate Smart Ad campaigns with Yahoo! and Teracent, also producing higher results than traditional campaigns.

While this is all part of Yahoo!'s YOS movement toward openness, it's not entirely clear to me why Yahoo! needs the third parties. Smart Ads was supposed to be able to do dynamic creative and targeting on the fly (from a 2007 release):

Yahoo! SmartAds is powered by Yahoo!'s leading behavioral, demographic and geographic targeting capabilities and aim to connect users with what they are looking for based on their distinctive, expressed interests. For example, if a user is browsing for hybrid cars in Yahoo! Autos and has selected San Francisco as their default location in Yahoo! Weather, Yahoo!'s SmartAds platform can assemble and deliver a display ad in real time that showcases a hybrid vehicle from a major auto brand, as well as local dealer information and current lease rates. This provides a relevant experience to the user and allows the marketer to reach a user who is likely to become a customer.

Smart Ads is also being used in mobile by Yahoo!. And is doing dynamic creative and targeting in the products context via a partnership with ShopLocal

Dynamic creative and ad delivery is also being done by Placecast and is the key to truly delivering on the promise of LBS. 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. 

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Here's more on how SmartAds works, with some examples, from the Yahoo! Search Marketing Blog