• The Wall Street Journal , Thursday, February 5, 2009 11:32 AM

New performance-driven ads, like customized ads that show different products to different users, online coupons, or Web ads hidden inside links in text, are helping marketers use their ad dollars more efficiently. For example, Web retailer Overstock.com plans to spend $15 million, or 20% of its marketing budget for the year, on personalized ads from Choicestream, a maker of product-recommendation software.

To create the personalized ads, Choicestream relies on the data Overstock provides about what customers browse and purchase on its site. Choicestream uses the data to select personalized products and offers to insert into Overstock ads. According to Patrick Byrne, Overstock's Chief Executive, personalized ads drove a sevenfold increase in clicks and a threefold increase in sales relative to other display ads. "We are ramping it up as quickly as we can," he says.

Yahoo also offers similar customized ad products. Called Smart Ads, Yahoo SVP Michael Walrath, says demand has grown for these ads during the economic downturn. He adds that a new Yahoo service that allows advertisers to target their display ads to users who have searched for particular terms has also gotten a good reception. Advertisers' "budgets may be reduced, but the expectations of driving business aren't being reduced," he says.

Read the whole story at The Wall Street Journal »