Ok — my ranting’s done. Left-sided brain thinking now. Yahoo! SmartAds looks like an interesting product. If you’re looking for the three sentence description, here it is: SmartAds is a form of behavioural marketing. Yahoo! is able to monitor what you do and what you search for, and then serves up ads *not* necessarily based on what you’re seeing at the time, but based on what you recently searched for. If you looked for vacations, then you might see ads for vacations.

The contrast is with contextually based advertising, which Google does in its sleep with the Adsense program. What contextually based advertising does is serve ads based on the content of the site that you’re on right now — not based on what you were looking at or surfing for previously.

Now, the press release is pitifully devoid of many details, such as, but not limited to how it actually does this. My puny brain, however, suspects that it involves cookies somehow. That is, on partner sites, or even on Yahoo! itself (in its giant network), it places a cookie that leaves tracks as to where you’ve been. It might be that those cookies have also some kind of semantic meaning / data attached to it as well. For instance, “Amazon.com” has to mean “books” somewhere — whether it does that on the back end or on the cookie is not known.

Having said that, there are three questions that Yahoo! SmartAds has yet to answer (even as its not widely available — but what the heck).

1. What about cookie blockers? I don’t know if this is the only way that its able to track behaviour, but if it is one of the most important ones, this could be a bit of a hangup when you consider that most internet savvy people might have some form of cookie-blocking behaviour on — and secondly, on some settings in some browsers, it may be on by default. If you can’t use cookies, your ability to track behaviour might be compromised.

2. What about multiple users on a single computer? Even on PC’s that are using cookies, how will SmartAds distinguish between different users? If I search for Transformers yesterday, will my wife be seeing ads for Transformer posters when she’s looking for baby clothes? Or vice versa? I expect that the clickthrough and conversion rate *might* be affected with that.

3. Did you know the perception is that contextual advertising’s more effective? Well, last year in a study that was conducted by Outsell, that’s what most marketing executives thought anyway. Yes, its 2007, and no I have no data on how Yahoo’s SmartAds do today compared to yesterday, but the *perception* anyway, is that contextual advertising — what Google does — is actually more effective. And heck, whe you think about problems with cookies, you might understand why.

Ultimately real acid test will be when SmartAds is released to the wild, and what kind of results people get with it. And what Google does in response to it. After all, sure, Google has its tentacles in all kinds of pies, but you would hallucinating something fierce if you *don’t* think that Google is looking into behavioural advertising of some kind (I think its just a matter of time).

And then of course, the question will not be who is doing what — but who is doing it the best. And perhaps, who is *integrating* contextual advertising and behavioural marketing the best.

But I guess that’s a question for 2008 — unless Google surprises us next week.