• by Laurie Sullivan  @lauriesullivan, May 27, 2010

Macy's tapped Yahoo this week to recreate its offline Memorial Day sales circular into a Smart Ad-powered pullover ad unit in Yahoo Mail, becoming the first retailer to run the advertisement.

Yahoo worked with PointRoll to develop the rollover technology integrated into the Smart Ad. Clicking on it takes consumers to the Macy's home page, but hovering over it opens the unit into a full-page circular, taking up the entire page in Yahoo Mail.

The Macy's ad, which ran Wednesday and Thursday, garners a higher CPM compared with a standard IAB ad unit, according to Mitch Spolan, vice president of adverting products at Yahoo. "There is about a 230% increase in the difference between the 300x250 ad unit, which would normally run on Yahoo Mail, vs. the pullover that fills the entire page when someone mouses over it," he says.

The Macy's ad serves up in the Yahoo Mail account. The messages appearing in the advertisement change depending on the consumer who sees it. Macy's had Yahoo build two editions: Home and Swimwear. There's also a default edition if neither works, based on information in the person's profile. The potential to serve up a custom circular for each consumer exists through Yahoo's targeting technology.

Yahoo also leverages geotargeting technology to tell consumers where to find the closest Macy's store to them. Others that have run the ad include FTD and Olive Garden. These rollover Smart Ads are part of a push to turn the Web into a canvas. Spolan hedged the question on cost to the advertiser, but says advertisers are "more than willing to pay for premium ads."

On Wednesday, Yahoo Chief Executive Officer Carol Bartz told investors that advertisers need to take a look at the Web as an artistic palette, rather than take a 30-second TV spot and try to stick it into an online ad unit. That creativity such as the rabbit in Alice in Wonderland escaping from within the confines of an ad unit will drive engagement to build loyal fans for life, along with higher CPMs.

Hilary Schneider, executive vice president at Yahoo, spoke about Yahoo's advantage to combine science, art and scale in advertisements at the Investors day conference. She demonstrated a Purina ad where a dog walks from within the confines of an ad unit across the computer screen. More than 220 million users engaged with the Purina Alpo ad, some as long as 2 minutes on average.