Just one week ago, Yahoo merged its search and display ad sales units under one executive. The new product rolling out today has been in various states of advertiser beta test for months.

Yahoo is seeking a patent on the technology behind SmartAds.

"Yahoo's SmartAds gives marketers what they have long wanted from online advertising: the ability to deliver more personalized marketing messages to consumers, and still engage very large audiences with their brand," said Todd Teresi, Yahoo's senior vice president of display marketplaces.

Agencies can design a set of individual rich media creative assets and a database of offers, then let the technology assemble on-the-fly combinations.

For example, a user based in San Francisco who frequents the Boxing page on Yahoo Sports and recently searched for "Vegas deals" might get a "smart" display ad from an airline featuring the customized offer and creative: "Fly San Francisco to Las Vegas for Fight Night - $99."

Behavior is derived from both cookie-based data and information collected from Yahoo members who sign in, Teresi said. What makes the offering significant, said JupiterResearch analyst Emily Riley, is the behavioral targeting capability.

"Yahoo's SmartAds is the breakthrough marriage of brand and direct marketing that advertisers have been waiting for," said David Kenny, chairman of Digitas and Publicis Groupe Digital. "By combining their huge audience, dynamic ad creation capabilities and deep knowledge of user interests, Yahoo has developed a true innovation that will benefit agencies and their clients, especially companies with a large number of offers to present to many audience segments."

Yahoo is launching the product in the travel category and expects to expand to three vertical categories by the end of the year - most likely retail and automotive, Teresi said.

For auto advertisers, creative might include a geographically relevant image such as the New York skyline along with local dealer offers, Teresi said.

"All of a sudden, the ad experience becomes more relevant," he said, calling it a "templated assetized approach."

During the four-month beta testing period, SmartAds generally resulted in click-through rates of two to three times higher than static, non-personalized display ads using the same targeting and placement, Teresi said.

For now, SmartAds are being sold by the direct sales force, Teresi said, but at some point the buys may be possible through an automated or auction-based system such as the Right Media exchange.

SmartAds will run on both Yahoo and its publisher network sites.

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