SCIENCE

New study proves the power of hyperlocal online ad targeting in driving sales

Yahoo! has launched Yahoo! AdLabs, a group focused on providing scientific leadership to the industry and accelerating innovation in digital advertising products through Yahoo! Labs (http://labs.yahoo.com/), one of the world's premier industrial research organizations.

"Yahoo! Labs has been instrumental in developing Yahoo!'s advertising products, laying a foundation of scientific research and innovative data analysis, supporting everything from the world's most advanced display advertising marketplace to the world's most effective ad targeting capabilities," said Dr. Prabhakar Raghavan, Yahoo!'s chief scientist and head ofYahoo! Labs. "AdLabs will build on this success and break new ground in combining scientific rigor with a deep understanding of the practical needs of marketers."

Since its founding in 2005, Yahoo! Labs has produced powerful studies on online advertising, created the new scientific discipline of Computational Advertising, and generated numerous insights into consumer behavior and advertising metrics (see addendum for a sample of recent projects).

With the launch of AdLabs, Yahoo! also released the latest results of its breakthrough, multi-part study of online advertising in the retail industry, that uses a controlled experiment conducted at unprecedented scale to quantify the effects of one of the most important new levers available to online marketers in 2011, hyperlocal ad targeting. The results included:

• Hyperlocal targeting of a retail display campaign generated more than five times return-on-ad-spend, measured by sales lift at the retailer.
• 75% of the total return in this phase of the study was generated by in-store purchases.
• Customers who live within two miles of one of the retailer's stores represented 10.6% of the audience seeing the ads, but generated 56% of the revenue.
• Return-on-ad-spend was four times the spend for customers living within five miles of a store, and 21 times the spend for customers living within two miles of a store.

"Successful campaigns change perceptions about brands and increase sales. Marketers need new, breakthrough, scientifically-tested methodologies to drive these important metrics," said Ken Mallon, vice president and head of Yahoo! AdLabs. "Yahoo! has the scale to measure the impact of many campaigns and the breadth of expertise to produce the new models and innovations that will move the digital advertising industry forward."

"As media models fragment, so too do the models for understanding their effectiveness. At the same time, with more people doing more online and ad spend going up, marketers need answers more than ever," said Ted McConnell, executive vice president, Advertising Research Foundation. "Yahoo!, with its diverse but integrated palette of options, provides a great Petri dish for experimenting with new measures. I, for one, am delighted that Yahoo! is taking this challenge head on, and I feel certain the entire industry will benefit."

For more information on Yahoo! AdLabs, please visit the Yahoo! Advertising blog (http://www.yadvertisingblog.com/blog/).