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The quest for the perfect online ad

Web advertisers are moving beyond search, using powerful science to figure out what you want - sometimes before you even know.

By Paul Sloan, CNN Business 2.0 editor at large, February 26 2007

(Business 2.0 Magazine) -- On the Internet today, everybody knows you're a dog. In fact, legions of Internet companies also know your breed, your gender, your age, the neighborhood you live in, that you like pickup trucks, and that you spent, say, three hours and 43 seconds on a website for pet lovers on a rainy day in January. All that data streams through myriad computer networks, where it's sorted, catalogued, analyzed, and then used to deliver ads aimed squarely at you, potentially anywhere you travel on the Web.

But unlike the first Internet boom - where dumb, old banner ads were slapped up with zero regard to effectiveness - this time around, the programmers and analysts are taking center stage, helping to create new forms of display ads that not only do a better job of getting your attention but also can be tracked with laserlike precision. The new breed of supersmart, supertargeted display ads, says Usama Fayyad, Yahoo's head of research and data, is "just so much more powerful than search."

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Fayyad, fittingly, is a former rocket scientist whose resume includes a seven-year stint at NASA's Jet Propulsion Lab. He's an intense numbers guy who went on to found two data-mining companies, one of which he sold to Yahoo. As the most visited destination on the Web, Yahoo has an estimated 131 million monthly unique visitors to its sites. By dropping cookie files onto every Web browser that calls up one of its sites, Yahoo has amassed a staggering amount of data about its users. Fayyad rides herd on the 12 terabytes of user information that flow into Yahoo's servers every day, more than the entire inventory of the Library of Congress. The data is crunched, blended with information about what people do on Yahoo's search engine, and fed into models that predict consumer behavior.

This has led Fayyad to an important conclusion: What you do on the Web reveals far more about you than what you type into a search box.

Fayyad ran a test with brokerage Harris Direct (now part of E-Trade) to gauge how display ads affect brand awareness. Using Yahoo visitors as guinea pigs, Fayyad served some of them Harris Direct ads, and others house ads, and followed their behavior. The data that came back was anything but subtle: Those who saw the brokerage ads were 160 percent more likely to search in that category over the next three weeks, typing in keywords like "online brokerages." And they overwhelmingly clicked on a text ad for Harris Direct when it popped up in the paid search results.

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