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Yahoo now targets ads based on search behavior

The Internet pioneer is blending some aspects of search and display advertising, a move that reinforces the new CEO's views of the company's holistic strengths.

Stephen Shankland/CNET Networks

As part of its effort to make its core revenue engine more powerful, Yahoo introduced new ad targeting features Tuesday, including the ability to select advertisements based on what a person has searched for.

The technology, called search retargeting, is one of three new features designed to tailor ads based on user behavior. The other two are enhanced retargeting, which lets advertisers tune ads according to what users have done on the advertisers' Web sites, and enhanced targeting for search, which lets advertisers adjust ads shown next to search results according to user age and other factors.

Yahoo has argued that it's a stronger company when able to serve both online ad formats, the search ads next to search results and the "display" ads such as graphics and videos. Indeed, as evidence of its hybrid philosophy, it's begun testing display ads next to search results, something rival Google doesn't do.

New Chief Executive Carol Bartz thinks Yahoo is stronger as a whole than "pulled apart and left for the chickens." Of course, if Yahoo did sell its search business, a possibility that Microsoft Chief Executive Steve Ballmer indicated he's still interested in, it could arrange the partnership to use that search engine and thereby get access to the same search query data for targeting display ads.

The new targeting technology is an example of online advertising's advantages over conventional print, TV, radio, and billboard ads. At least in theory, ads can be shown to people whose characteristics or behavior give some indication they're the people advertisers want to reach. Search ads have long had this ability, since they're selected on the basis of specific search terms.

Although Yahoo's advertising business has suffered from the recession, it hopes the new technology will make its ad options more compelling.

"As the economy continues to put pressure on advertising budgets, marketers are looking for increased accountability for every dollar they spend. Yahoo's new targeting products significantly improve the ability for search and display advertisers to reach their target audience, providing increased efficiency and accountability," said Michael Walrath, senior vice president of Yahoo's advertising marketplaces group, in a statement.