Yahoo to upgrade ad system

Yahoo has launched a much-anticipated upgrade to its online advertising system as it tries to bring to graphical display ads some of the innovations that powered Google's rapid rise in search marketing.

Playing to Yahoo's strengths in display ads and technology targeting pitches to users' interests, the new "Apt from Yahoo" platform will initially involve just the newspaper companies in a 2-year-old consortium led by Yahoo. Many of the papers joined that effort hoping for relief from the decline in their industry.

The platform, renamed from Amp because of a trademark conflict, is intended to make it easier for advertisers and publishers to buy and sell display ads, borrowing self-service techniques that have made text-based search ads lucrative for internet companies, especially Google.

By tapping data Yahoo already collects on users' locations, demographics and surfing habits, Apt aims to help advertisers narrow their pitches to specific groups of customers because sharper targeting will let websites charge more for ads.

William Dean Singleton, vice chairman and chief executive with MediaNews Group and chairman of The Associated Press, said the typical newspaper now sells more than half of its inventory at deeply discounted rates because it can't offer such specific targeting.

Singleton said Apt should help eliminate or reduce the need for deep discounts.

"If we can sell the amount of online advertising we are selling today at rates that were much more normal, you wouldn't be hearing people talk about the woes of the newspaper industry," Singleton said at a launch event during the ad industry's Advertising Week.

Ken Doctor, media analyst for the research firm Outsell, said newspaper websites are too small to do much targeting by themselves. Sales through the Yahoo platform, he said, is one of the newspaper industry's top growth potential in 2009.

It's unclear whether the technology will give Yahoo the lift it needs. A previous technology revival focusing on search ads, called Panama, failed to resonate with Wall Street despite accolades from advertisers, and Yahoo has remained in a funk, its stock recently sinking to its lowest level in nearly five years.

The new platform comes at an inopportune time because advertisers are pulling back spending as the US economy weakens, said David Hallerman, a senior analyst with eMarketer.

But even if it isn't a game-changer, Hallerman said, it can help Yahoo reach the companies that are still advertising.

Apt seeks to automate many of the tasks now handled manually with display ads. Such automation has been crucial to the growth in search, but display ads involve more variables that have made automation challenging.

Addressing those challenges took 18 months, hundreds of employees and hundreds of millions of dollars to buy startups with key technologies.

Apt also allows websites to pool their available ad spaces so advertisers can make larger purchases more quickly. That's especially important with targeted advertising because a single site may not deliver enough readers matching an advertiser's criteria.

Yahoo President Sue Decker said Apt positions the company to capture growth in display advertising and replaces legacy systems "created 10 or 15 years ago when the internet first started."

Noting that Google still is weak in display ads, Decker said Yahoo is trying to build the technology and assemble a large enough network of websites that it becomes "a must buy" for advertisers.

Hallerman said the technology could help newspapers' websites, in particular, because of its large inventory of display ads and the comfort advertisers already have with newspapers' brands.

Online advertising at newspapers has been growing, but too slowly so far to compensate for steep declines in print advertising.

Yahoo is initially offering the platform to Hearst Communications' San Francisco Chronicle and MediaNews Group's San Jose Mercury News, both near the company's headquarters in Sunnyvale, California.

The company said it will eventually open the system to rivals, too, so companies like Google, Microsoft and Time Warner's AOL can add inventory available through their existing networks of websites. Yahoo already has a deal with Google on search ads, but government regulators are assessing whether the alliance will diminish competition.