• by Mark Walsh  @markfwal, June 22, 2009

Keeping up with Google, Facebook and MySpace, Yahoo Monday unveiled its own self-service option for display advertising aimed at small- to-medium sized businesses.

Through its new My Display Ads service powered by partner AdReady, Yahoo hopes to convert search advertisers into display ad buyers and boost its local display ad revenue. The pilot program is designed to make it easier for small companies to advertise on the Web portal by allowing them to spend as little as $30 a day and choose from 800 ad templates to create campaigns. Users can bid for unsold Yahoo inventory on a CPM or cost-per-click (CPC) basis.

"This new solution provides an affordable and accessible option for businesses to run brand and performance campaigns that reach the local audiences that matter to them most," said Joanne Bradford, senior vice president of North America Revenue and Market Development at Yahoo.

Yahoo has been making the case to marketers that a combination of search and display advertising delivers better results than using one format alone. Earlier this year it began testing "Rich Ads in Search," a program that enables advertisers to include images and video alongside search results. Yahoo also uses search data to better target display ads.

But not everyone is convinced the new DIY service will be a hit with local advertisers. "I think this is not going to work," said Gordon Borrell of Borrell Associates, which focuses on local market media research. "Local advertising is bought, not sold." He explained that smaller advertisers are accustomed to ad sales people pitching programs to them rather than having to play a proactive role in advertising.

Without plenty of hands-on support, small business owners tend to quickly abandon ad initiatives they may have trouble understanding or using easily. "They're very skittish," said Borrell, who estimates that Yahoo garners less than 10% of local online ad spending, or about $1.3 billion in 2008.

What about search marketing, which is essentially a self-service format driven by the SMB market? Borrell maintains that search is marked by a high degree of churn. A study released by his firm and Clickable earlier this month found that about half of businesses that buy search ads directly from Google and other search companies don't come back the following year.

A Yahoo executive Monday assured the new ad system would benefit small businesses. For one thing, the company is applying knowledge it has gained from the search ad side about gearing the display program to SMB advertisers. "It just takes a handful of steps," said Patrizio Spagnoletto, senior director of B2B Marketing at Yahoo. "We feel like we've done everything we can to simplify the process of buying ads and putting it in plain English terms for small, local businesses."

In testing so far, he noted that completion rates by advertisers have been in the "low-teen" range. "That's actually a very good rate for the sign-up process," he said. Yahoo's announcement about My Display Ads includes a testimonial by Klaussnerhome, a local furniture store in Greensboro, North Carolina, which said it had record sales and foot traffic after using the service to promote its annual Memorial Day sale.

He added that Yahoo is promoting the new program to existing search advertisers via email and other means, but is trying not to push it too hard for fear of alienating them. "The cross-selling activity will be moderate," he said.

According to an online FAQ about the program, the self-serve display ads will not appear in search results. While users can target ads geographically, demographically, and by industry sector, such as automotive, they won't know exactly when or where ads will run.

Yahoo's display ad revenue in the first quarter fell 13% from a year ago as the recession continued to have an impact on spending, especially for premium placement. A J.P. Morgan analysis last month, however, argued that the company is still gaining market share against rivals such as AOL and Microsoft, which saw an 18% and estimated 20% drop, respectively, in display advertising in the quarter.