Yahoo! has just unveiled a new SmartAds program which promises to provide unrivalled levels of relevance and targeting for online advertisers. Now creative and messaging will be dynamically merged - presenting Yahoo! users with more tailored advertising than ever before.

After the recent merger of their search and display advertising divisions, this new smart advertising program has many in the online advertising space taking notice. While SmartAds are only being used in the travel category at present with limited expansion plans for 2007 (2 other verticals by the end of the year), the behavioral targeting intelligence behind the system is the real genius.

The biggest challenge for any advertiser is to merge the right message and creative to the right audience. Yahoo! SmartAds allow advertisers to harness the wealth of behavioral information Yahoo! gathers, both through cookies and Yahoo! members who sign in, and use this information to tailor campaigns on the fly.

“Yahoo’s SmartAds gives marketers what they have long wanted from online advertising: the ability to deliver more personalized marketing messages to consumers, and still engage very large audiences with their brand,” said Todd Teresi, Yahoo!’s senior vice president of display marketplaces.

Companies or agencies can create a range of unique creatives and by providing Yahoo! various offers or messages, SmartAds will display the best combination of each based on the behavioral data of the user.

According to Teresi, SmartAds generally generated click-through rates, two to three times higher than static, non-personalized ads during the four month beta testing phase.

At this stage, SmartAds is only being sold by Yahoo!’s sales force and is probably only suitable for bigger budget advertisers. Lets just hope the advertising platform is scalable and this long overdue behavioral targeting is made available more widely in the not to distant future.