[February 03, 2011]

Yahoo! Labs Launches AdLabs to Advance the Science of Digital Advertising

Yahoo! Inc. (NASDAQ: YHOO) today announced the launch of 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 (News - Alert) 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 of Yahoo! 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 adspend 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/).

ADDENDUM: Yahoo! Labs - New research and insights into online advertising and consumer behavior

Yahoo! Labs is a leading industrial research and development organization focused on the science and technologies of the Internet. Its mission is to advance the state of the art across its areas of focus and create insights, driving the next generation of businesses for Yahoo!.

At Yahoo! Labs Winter Science Week on February 1-4, 2011, Yahoo! gathered the company's leading scientists to examine the most important trends and questions about the future of the Web. Research at the event showcased the company's expertise in the field of online marketing and advertising - most notably in Yahoo!'s ability to rigorously measure and quantify the effects of advertising.

Highlighted topics include:

• Location, Location, Location: Understanding the Effectiveness of Online Advertising in Driving In-Store Retail Sales - Using a clinical trial-like methodology never before conducted at true Internet scale (more than 3 million users), this multi-part, ongoing study quantifies the return on investment of online advertising campaigns. The most recent results focused on the impact of hyperlocal targeting on in-store and online sales, finding that hyperlocal targeting of a retail display campaign generated more than five times return-on-ad-spend, with 75% of the total return generated by in-store purchases.
• Birds of a Feather, Shop Together - Measuring the extent to which friends' behaviors predicts your own, this study found that in several consumer domains the effect is substantial, complementing traditional demographic and behavioral predictors.
• Reach, Frequency, and Relevance - This study examined the impact of frequency, or number of times someone is exposed to an ad, on user engagement. Contrary to conventional wisdom, the experiment, conducted on the Yahoo! homepage, found that individuals are just as likely to click on the 20th impression as they would the first impression.
• The Demographics of Web Surfing - This project examined the demographic composition of the top 100,000 domains on the Web, finding numerous prominent sites to have highly homogeneous audiences, which allowed researchers to uncover insights into consumer behavior.
• Ad Relevance and Context - This eye-tracking study revealed that the relationship between editorial content on a webpage and the content of an advertisement has a direct effect on the amount of time a person spends looking at an advertisement. Further, when the editorial and advertising content are related, ad recall also increased.
• Who Searches for What and How? - In a paper to be released at the 2011 WSDM Conference in Hong Kong, Yahoo! Labs conducted an in-depth segmentation analysis of an anonymous query log of 2.3 million Yahoo! users to evaluate and identify online search behavior in terms of who users might be (demographics), what they search for (query topics), and how they search (session analysis). A sampling of the full results revealed that:
  • People with higher educational levels made fewer navigational queries.
  • Searches related to actors and actresses were about three times higher in L.A. than in any other region.
  • San Francisco had the highest percentage of travel queries out of any region.

About Yahoo!

Yahoo! (NASDAQ: YHOO) is an innovative technology company that operates the largest digital media, content, and communications business in the world. Yahoo! keeps more than half a billion consumers worldwide connected to what matters to them most, and delivers powerful audience solutions to advertisers through its unique combination of Science + Art + Scale. Yahoo! is headquartered in Sunnyvale, California. For more information, visit the pressroom (pressroom.yahoo.com) or the company's blog, Yodel Anecdotal (yodel.yahoo.com).

Yahoo! is the trademark and/or registered trademark of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.

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