Yahoo has launched the Yahoo AdLabs group to promote innovation in digital advertising products through its Yahoo Labs industrial research organization. The company also released the results of its multi-part study of online advertising in the retail industry in tandem with the AdLabs launch.

The study focused on hyperlocal ad targeting, believed to be one of the most important new tools available to online marketers this year. It found that hyperlocal targeting of a retail display campaign generated more than five times return-on-ad spending, measured by sales lift at the retailer. In-store purchases accounted for 75 percent of the total return, while customers who live within two miles of the one of the retailer's stores represented 10.6 percent of the audience seeing the ads, generating a whopping 56 percent of the revenue.

"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."

The hyperlocal ad study also found that return-on-ad spending was four times the spending for customers living within five miles of a store and 21 times the spending for customers living within two miles of a store. The multi-part study is using a controlled experiment conducted to quantify the effects of this type of ad targeting.

"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 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."

"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."

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