• by Laurie Sullivan  @lauriesullivan, November 12, 2015

Kohl's, Wayfair, and Overstock are among the retailers piloting Yahoo's new ad format, Product Ads, which serve in search and display on mobile, tablet and desktop devices, with native ads to come soon, according to a Yahoo spokesperson.

Although Yahoo launched the offering Thursday with a handful of major retailers, but faces competition from Bing and Google, especially during the holidays. Images have a high propensity to generate clicks, but success will depend on several factors. One thing to keep in mind, each of the three major search engines attract a specific type of consumer.

"We don’t have direct insight on the demographic differences between Yahoo and the other engines, but we can see that there is a fairly wide gap in the performance between search ads on Yahoo and Google," Mark Ballard, senior director of research at Merkle RKG, told Search Marketing Daily. "Yahoo search ads have 20% lower conversion rates than Google search ads. The big question is whether or not that speaks to the quality of the ads or the demographic differences between the engines. I suspect that it is some of both."

It turns out that Yahoo Product Ads are similar to those on Google and Bing when it comes to search, but on the display side the ad unit offers advertisers the ability to reach potential customers across the Web with ads displaying rich images of products, writes Merkle RKG Senior Research Analyst Andy Talyor. "Product ads have grown significantly for AdWords and Bing Ads during the past couple of years, and accounted for 60% of all Google non-brand traffic in Q3 according to our Digital Marketing Report."

ChannelAdvisor, Commerce Hub, and Merkle RKG are some of the technology partners supporting product ads during the pilot.

Courtney McKlveen, VP,  industry lead for retail and travel at Yahoo, estimates that early advertisers using Product Ads have seen up to 20% higher conversion rates and more than 30% lower cost per acquisition, enabling them to scale campaign impact without scaling budgets.

Yahoo's expansive reach across its network of sites, from search to the shopping site Polyvore, could have a favorable impact on its Product Ads.

A recent study from Yahoo and Ipsos reveals that 44% of consumers use a search engine as their primary or secondary step when researching holiday gifts, and 53% spend more time online in search of the best deal. Based on the findings, Yahoo believes its targeting capabilities, expansive reach and dynamic ad formats will provide advertisers an easy way to showcase their products and turn more shoppers into customers in time for the holiday shopping season.

Andrew Belsky, director of U.S. digital marketing services at ChannelAdvisor, notes one retailer with Product Ads on Yahoo Search since July has been seeing as high as a 14-to-1 return on ad spend.