• by Laurie Sullivan , Staff Writer @lauriesullivan, July 26, 2010

Integrating search-engine marketing (SEM) data with display advertising campaigns is becoming more important, and Yahoo's Right Media could sit at the forefront of that transition. The company built a new business on the exchange model, and four months ago began partnering with demand-side platforms (DSPs) Invite Media, Mediamath, Data Xu, Turn and X+1 as part of a pilot program to establish best practices in audience buying for clients. Then, Yahoo's exchange launched a pilot.

Ramsey McGrory, vice president of Yahoo North American Marketplaces and head of Right Media, says it's all part of the exchange's multi-channel strategy. Some of it comes from lessons learned during the DSP pilot. Tests validate benefits from integrating multiple media channels and the value of SEM data when it comes to informing advertisers about display buys. So, Yahoo decided to expand the program, offering added features to publishers and advertisers to support companies tapping into Yahoo's exchange.

While Yahoo had been the only publisher in the DSP pilot, Demand Media recently came on board to expand the supply of available media, allowing DSPs during the pilot to use its media to generate higher yields.

Methods to more efficiently support order processing, sales engagement and network rights are among the issues the pilot will address. Companies like Marin, Efficient Frontier, Kenshoo and SearchIgnite also began participating in the pilot, brining "an algorithmic infrastructure DNA" from their respective companies. They don't, however, come with the same level of expertise in display advertising as the DSP companies, so the companies will need to closely collaborate on solutions.

The pilot now gives Demand Media and Yahoo access to real-time bidding (RTB) options. These added benefits aim to provide advertisers the tools to dig into audience data and collaborate more closely on search and display advertising. It should help SEM advertisers who struggle with greater fragmentation across display networks.

McGrory presented the findings from the test in Chicago at Right Media Open, a gathering where advertisers shared insights and discussed industry challenges. The pilot produced CPMs, on average, more than three-times what the ad networks typically pay, he says. The Right Media exchange serves between 7 billion and 9 billion impressions daily, and CPMs fluctuate between 5 cents to $50, depending on the publisher, the frequency, the location and the audience data required to target the ads.

Yahoo saw the quality of ad demand reflected in pricing during the pilot. As the DSPs executed ad targeting more effectively, ad networks spent less money, but DSPs spent more, which provided benefits both to buyers and sellers. The industry has begun to see combine services for search and display, or data companies trying to enable the demand side.

DSPs represent a shift in buying from a TV-style composition-based media buy to a more granular audience based media buy. DSPs are focused on targeting the right audience and controlling frequency more effectively, which means that a higher percentage of ads are served to audiences that are actually the right demographic.

The DSPs are willing and able to pay higher CPMs for the more, well-defined audience segments. They are winning impression auctions and beating out ad networks in the process. DSPs spend increases. Ad network spend decreases. Aside from the technology, DSPs act more like agents and act in the interest of the advertisers. Ad Networks are more reluctant to share data and disclose performance.

The pilot could, in the long run, create a combined SEM and display ad attribution model that combines the last click with display advertising metrics through Right Media. The industry also might see a more effective data strategy, brand safety model or deeper integration with reporting systems. We'll have to wait and see.