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Through all of Yahoo’s (Nasdaq: YHOO) struggles over the past year, the internet company has typically been able to count on the strength of its display advertising. Not anymore. The rise of social networking, coupled with the growing competition coming from Microsoft and Google through their recent ad network acquisitions, has put significant pressure on the segment. Yahoo told analysts last month that it is pinning its hopes for growth on its new SmartAds behavioral ad targeting service as the key to its turnaround. The company introduced SmartAds on the Yahoo Travel channel last month, billing it as a mix of ad targeting with user behavior on one side and ad creative databases on the other. Now it’s making the case to the Journal.
Looking at Yahoo’s Q2 display-ad revenue, that segment was up 13 percent year-over-year to $441 million (more than a third of its total $1.24 billion quarterly revenue), according to Jefferies & Co. analyst Youssef Squali. However, those numbers also showed notably slower growth than Q1’s 20 percent rate. Investors were also shaken when they were told not to expect a rebound in Q3, asYahoo lowered its financial targets last month, sending Yahoo stock down 31 percent from its 52-week high in early May. Although careful to note that SmartAds are not a panacea, and that its overall display ad recovery plans involve other initiatives too, with eMarketer projecting behavioral ads’ to grow to $1 billion in the U.S. next year from $575 million this year, Yahoo views the service as a crucial tool that it can use to tap into that ad category.