Yahoo Buys Dapper to Battle Google in Contextual Ads

Yahoo Oct. 5 agreed to buy contextual display ad provider Dapper for an undisclosed sum. The assets should help Yahoo advertisers build more personal, relevant ads.

Yahoo Oct. 5 moved to build on its market lead in display advertising assets by agreeing to buy partner Dapper for an undisclosed sum.

Dapper provides "dynamic display ad creation and optimization," a fancy way of saying it makes tools that help advertisers build and make money from contextual ads placed on Websites.

Dapper's "smart ads" take the lead of the content people are consuming on a publisher's Website to "automatically show the right product, offer, or message."

For example, a real estate company used the technology to display ads on real estate Websites about houses visitors to those sites indicated interest in by their searches.

Dapper was founded by Eran Shir and Jon Aizen in 2006. While their goal was to make a mark in display advertising by creating personalized ads, Shir acknowledged that it is difficult to scale in a market where ad giants Yahoo, Google, Microsoft and plenty of smaller companies are vying for business.

Yahoo will grant Shir and Aizen access to a broader range of advertisers.

"Yahoo is committed to the Smart Ads program and remaining open to working with innovative third parties in addition to providing a proprietary solution with the acquisition of Dapper," the company said in a statement.

Yahoo aims to complete the deal in the fourth quarter of 2010.

Yahoo has been careful about its acquisitions in 2010, choosing content providers and Web services to buy. The company purchased content plays Associated Content and Citizen Sports and location-based service Koprol.

The Dapper deal is curious until one considers the market context. One might be inclined to think Yahoo, easily the market leader with more than 20 percent of display ads, would choose to acquire businesses where it isn't so strong.

However, Google has been gaining momentum in display ads thanks to its DoubleClick and YouTube businesses. In buying Dapper, Yahoo is defending its turf, adding a personal touch to its display ad properties.

Personalization is something Google, Facebook and Microsoft have been thinking a lot about as they seek to expand their digital domains.