Yahoo! is expected to launch its new 'SmartAds' programme next week, which will enable advertisers to fine tune the delivery of banner adverts to a particular audience.

In a similar way to Microsoft's targeting tools on their AdCenter PPC system, Yahoo!'s new advertising system allows advertisers to present adverts to users based on their Internet profile, including data on their location, recent product searches and, in some cases, age or household income. Yahoo! says that this technology will allow advertisers a greater degree of targeting and make adverts more relevant to users, taking another step towards personalised web activity.

One of the main elements in this approach is behavioral targeting, where a user's web activity is tracked and profiled so that products can be suggested to them, based on their likely interests. The market for this form of targeted advertising is expected to nearly double from its current size to $1 billion in 2008 and to $3.8 billion by 2011, according to research firm eMarketer.

The new SmartAds system is taking this method of targeting a step further by providing advertisers with a template for ads, using several variables that may be compiled 'on the fly' to suit the data on a specific reader. This is moving the traditional blanket banner advertising model closer to the targeting of search advertising and Yahoo has said that they would merge their display and search advertising businesses to address client requests for campaigns that combine both types of ads.

Google is, of course, expected to launch a similar system soon, although unlike the portals of Yahoo! and MSN, they lack the depth of data for targeting web users. This is where the data they are collecting from personalised search and from other site acquisitions in the recent past will help to contribute to their targeting capabilities.