• by Mark Walsh  @markfwal, May 21, 2009

Yahoo Thursday announced a new program to partner with outside ad technology companies to bolster its Smart Ads platform and to extend the customized display ad product to mobile phones.

The Web portal has already begun working with display ad technology companies Tumri and Teracent Corp. to help power Smart Ads, but plans to certify other ad partners over time.

Launched almost two years ago, Yahoo's Smart Ads use anonymous data gleaned from users' search and other site activities to create personalized ads that show different offers to different consumers. The aim is to increase the efficiency of ad spend by delivering more highly targeted messages.

Yahoo says Smart Ads to date have resulted on average in double the return on investment of traditional banner ads and three times higher click-throughs. By working with ad tech specialists such as Tumri and Teracent, the company plans to fine-tune its ad-targeting capability further.

"This allows us to focus on our core competency of developing and building the best user experience possible on Yahoo," said Mitch Spolan, vice president of North American field sales at Yahoo. "We focus on understanding what our users want and leveraging that information for Tumri and Teracent and other partners that work with us."

Tumri's link to Yahoo was strengthened last month when Jeff McCombs, former chief of staff to ex-Yahoo President Sue Decker, became chief financial officer of the Mountain View, Calif.-based company. Its flagship product is the AdPod, which allows marketers to tailor display ad content such as a call-to-action, pricing and background color on the fly to match the right person with the right ad at the right time.

Yahoo worked with Tumri to create a Smart Ad campaign for Hewlett-Packard that it says generated more than 20,000 different creative executions reaching more than 140 million U.S. users. The effort delivered an ROI more than 20 times higher than the computer giant's traditional display campaigns.

"The ability to run a display advertising campaign that can match the ROI of my search marketing spend is a potentially game-changing proposition," said Catherine Paschkewitz, director of demand generation for HP Direct, in a statement.

With ad budgets squeezed in response to the recession, marketers have turned to search as a more cost-effective type of online advertising than other formats. Yahoo, which saw display ad revenue on its own sites fall 13% in the first quarter, would certainly like to grab more online ad dollars through better performance on the display side.

With San Mateo, Calif.-based Teracent, Yahoo is also bringing Smart Ads to the mobile Web. In addition to customizing ads based on demographic and behavioral data, the mobile version of the platform will allow marketers to target users by other factors such as location and time of day, as well as specialized attributes like local weather.

In partnership with Teracent, Yahoo developed a Smart Ad online campaign on behalf of Travelocity, which it says led to a 79% decrease in cost per transaction, a 230% increase in transaction volume, and a 651% increase in click-throughs compared to previous campaigns.

Teracent also boasts an ex-Yahoo executive in Chip Hall, who joined the company in December as senior vice president of sales and marketing.

When it comes to certifying additional partners for the Smart Ads program, Spolan said the ability to marry their ad technologies to Yahoo's huge amount of traffic and user data was a key consideration. Nearly 150 million users spent 43 billion total minutes on the site last month.

"We have a pretty strict certification process partners go through to make sure they can handle the traffic volume and compute and dynamically serve the right ad at the right time," he said.