Yahoo! is set to place contextually relevant display ads with its newspaper consortium, which now represents 40 percent of all newspaper circulation. The new AMP program for newspapers begins by the end of 3Q at the San Jose Mercury News and SFGate.

Yahoo! and the newspapers are banking big on AMP’s success. Indeed, it has been reported that Yahoo! has 800 people involved in some fashion with the consortium (something I’d like to learn more about).

Working with AMP’s behavioral capabilities, newspapers are hoping to double CPM rates, in some cases, and also see some new advertisers from Yahoo!. Analyst Ken Doctor notes in a blog post that many of the newspaper execs he talks to believes AMP is the most important part of the consortium deal.

But how big will it get? And at what point does Yahoo!’s ContentMatch search service, which is being beta tested at some newspapers, get commingled with AMP? It is hard to say. One thing that isn’t likely to happen is that Yahoo!’s search deal with Google boosts the revenue received by the consortium. Doctor, in his blog post, says the consortium deal already has a guaranteed level of revenues from ContentMatch.

The New York Times is set to recruit small-business advertisers via a deal with AdReady, the Seattle-based ad agency that provides a choice of 600 free templates for banners, customization tools and usage reports.

The Times will recruit its own advertisers via in-house promotions. Advertisers will have a choice of 14 sections of the site that are self-selected by advertisers (i.e., sports, international news, etc.). Alternatively, advertisers can simply choose Run of Site, or opt for self-service geographic targeting, since The Times is positioned as a national newspaper. The program is especially geared toward advertisers with “budgets under $10k.”

In a release, The Times makes a curious reference to serving “the long tail of online display advertising.” I am still pondering that one. It probably refers to the opportunity to serve advertisers that might have otherwise made a Google purchase, even though Google’s text-based advertising might be an imperfect match.

For AdReady, the white-label deal with The Times continues efforts begun with The Cobalt Group and Allrecipes.com. In other recently inked deals, AdReady acts as a media planner with a slew of ad nets, including Yahoo!’s Right Media, Advertising.com and Google.

Kate Kate from ClickZ has more here.

Zillow continues its march up the real estate value chain with a new feature that allows house buyers to apply for mortgages. The mortgage service, like everything else on Zillow, is ad-supported and free to both buyers and lenders. It is a direct strike against companies like IAC’s LendingTree.com that sell leads.

The company’s goal is to place high-value contextual advertising. BankRate.com, another mortgage service, apparently gets CPMs in the $50 range.

Key features of Zillow’s mortgage service are a “blind” registration that doesn’t compromise the identity of home buyers; the input of more detailed registration information, such as house value, which allows for more exact quotes; and a requirement that lenders stick to their quotes — a real problem in the mortgage quote game, where “bait and switch” is rampant.

Also in place is a lender rating system along the lines of eBay’s rating service. It would presumably take a half-year or more before there are enough ratings to make it scale.

Zillow expects its high user volume will give it a major lead over rivals, such as LendingTree.com. It claims 5 million monthly users, propelled by the recent addition of 1.5 million listings from various brokerages and real estate media such as NCI’s The Real Estate Book. There is still a backlog of 400,000 listings that haven’t been put up yet.

Those are internal numbers, however — and quite remarkable given the housing recession. Rating services such as comScore and HitWise suggest Zillow has considerably less usage.

Jorrit Van der Meulen, Zillow’s VP of partner relations, notes that a high percentage of Zillow’s users are looking for a mortgage. Plus there is a built-in group of potential advertisers. If there are 5 million users, that means 150,000 lenders are already using Zillow.

While Zillow is bullish about the mortgage service, it says it won’t have an immediate impact on its earnings (the company hasn’t turned a profit yet, but claims a big boost in recent ad revenues). “Marketplaces don’t happen overnight,” Van der Meulen says. “The (immediate) impact of this will be really, really small.”

In other Zillow news, Van der Meulen says the company has formally completed its deal to provide an exchange of services with many members of the Yahoo! newspaper consortium. There had been some skepticism that such a deal would get completed.

YouTube launched a series of new analytics features today, known as Insight. The product gives video producers more detailed information about where and when their videos were viewed. For now this drills down as far as state and country (using IP address) and day of the week. Future versions could get more granular with ZIP code level reporting and day parting.

The reasons behind this are clearly to drive more commercial appeal in YouTube and its monetization efforts, which so far include contextual ad overlays to videos. With more knowledge of who is watching your videos and when, advertising becomes more attractive and measurable. But for those that aren’t purchasing ad overlays, or for those not participating in AdSense for video, this can still be valuable.

Local merchant video, for example, isn’t content that includes advertising; it is the advertising. As we’ve argued, this content has value for users in providing a richer local search experience, and it has clear appeal for advertisers interested in local branding. Though a majority of this local video advertising has happened within IYPs and local search sites (for good reason), there is also the opportunity to utilize YouTube as an auxiliary (and free) distribution tool.

The universal search trend enhances this opportunity, as we’ve examined. Insight now makes this even more attractive for SMBs to experiment with video advertising and track its performance and local relevance. But like it is with search, self provisioning will be a sizable impediment to wide-scale SMB adoption of YouTube and Insight. Third-party local SEM and SEO players will therefore be the ones to utilize these tools the most, on behalf of their clients.

Few of these firms, including eLocalListing, are tapping into universal search opportunities by offering video to their SMB clients, but more will follow. IYPs — currently offering video that is distributed only within their domains — should also come around to utilize YouTube as a means to get their SMB advertisers’ videos in Google search results. Now that performance can be measured and reported back to local advertisers, the benefits come closer into focus.

More and more, people are looking at what Google can’t (or won’t) do. One thing Google isn’t doing is selling a lot of ads on a hyperlocal basis. If you look for a plumber in Tribeca, you are likely to get ads for all of Manhattan. That might simply be an issue of making sure it has enough ads to fill the inventory.

But Google also doesn’t generally get a read on information within a map itself. That’s where LAT49 sees a market. The service, from IDELIX Software, a Vancouver-based company, looks to work with providers of customized maps, leveraging Ajax and Flash, and then sell inventory against it. The company has 20 people, including a five-person sales team for selling travel/tourism, sports and recreation, real estate and local (generally).

In December, the company started working with MapQuest Gas Prices to place advertising along with the regional gas quotes. It also works with various vertical sites, such as mapmyride.com, runningmap.com and oobgolf.com to provide customized maps — and relevant ads — for people seeking a good bike route, jogging path or golf course in Southern California, or wherever they are. The ads also aren’t restricted to specific subjects, typically brands (i.e., Trek bike ads). Instead, they can be for a local bike shop, or a favorite watering hole for bikers.

One of the company’s unique attributes is the ability to place ads on top of maps, rather than having them run alongside as with most sponsored search. Chloe Morrow, vice president of operations, says that with most sites, maps are “too small because they have to make room for the ads” — a lose-lose situation.

The ad placement also frees the advertiser from a specific location. With LAT49, for instance, an REI ad is merely placed near a park, because it has an outdoor context. It doesn’t have to be at REI’s downtown location. Starbucks has similar efforts.

The company also says it benefits from being able to move the ad context as people mouse up the map — north, south, west or east. Many people who are planning a trip might take in huge swaths of geography, but always see the same ads from the origination of the search — something that may have become irrelevant (by the time they get to Phoenix).

Neal Polachek and I had the opportunity this morning to sit down with Mike Galgon, cheif advertising strategist for Microsoft. Galgon was brought on board as part of Microsoft’s $6 billion acquisition of aQuantive, which he cofounded in 1997.

The $6 billion price tag was was roughly 2x premium at the time of purchase, 10X revenue, and almost 50X cash flow. It was also MSFT’s largest acquisition to date (and double what Google paid for DoubleClick), all showing the company has either lost its mind or it sees transformative capability in the Atlas platform. Galgon’s job is obviously to argue the latter and he makes a strong case.

On a basic level, Atlas will bring MSFT’s ad placement capabilities (display, video, text) beyond MSN to cover the remainder of the Web. It will also be important to compete with Google/DoubleClick (which closed on Tuesday). Galgon in fact believes that consolidation and other factors will cause 80 percent of the online ad placement to be covered by Google and Microsoft, while the remainder will be a fragmented mix of local and vertical ad networks.

He argues that Atlas not only extends addressable ad inventory but also display ad targeting capability at an important time. Behavioral targeting is the key here, to move beyond contextual display advertising where growth is flattening, as it is in search. The next growth curve will come with inventory on other devices or media, such as mobile, IPTV and in-game advertising, where MSFT is embedded in various ways (Windows Live Mobile, Massive, Mediaroom).

Search doesn’t hold the opportunity it once did with slowing revenue growth and Google’s dominance in both user and advertiser market share. But these other ad delivery opportunities are where Microsoft sees the “greenfield.” Atlas is the key to sit between this content and advertisers and agencies (aQuantive-owned Avenue A/Razorfish fits well into the equation).

Whether it was worth the premium is still an important question that will have to be proved in time. But I’m closer to believing than I was yesterday.

One big takeaway from the NAA Marketing show last week in Orlando was that newspapers are ready to build up a zillion niche products that allow them to leverage their editorial talents. But not much progress, or even attention, is being paid to local search. It makes you wonder if newspapers are really serious about reaching out to the high volume of small businesses in their communities that have previously relied entirely on Yellow Pages.

The Seattle Times Co., however, is definitely an exception to the rule. Today, it launched “Network Search” across all its newspaper and vertical services, including Seattletimes.com, SeattlePI.com, NWsource.com, NWJobs.com, NWautos.com, NWapartments.com and NWHomes.com. The new search — which is not unlike the “Federated Search” solutions available from Harvest Info and Gannett’s Planet Discover – also incorporates some blogs and other sources.

Developed with FAST Search and Transfer (which is being purchased by Microsoft), Network Search bites the bullet with a single search box.

Many papers have been reluctant to go in that direction because the results would be too generalized. But the end result is that some papers have a dozen or more search boxes. And nobody ever thinks to look for anything on the site. They just go to Google.

One immediate advantage of The Times’ Network Search is that it opens up sponsored search advertising in a big way — something that has been largely hit or miss using third parties. In my limited testing, it works well.

A search for “Dungeness Crabs,” for instance, returns news stories on the harvest and restaurants where you can get them. It also has helpful sponsored search results for several excellent mail-order houses. A search for “Marqueen” has all the reviews and news to the nice boutique hotel in Queen Anne. And helpful sponsored searches for the competition.

A search for “Maria Cantwell,” on the other hand — the only senator I know since she used to do business development for Real Networks — returns her office’s latest news releases and news stories. And then also sponsored links for “Cantwell Hotels” and other things that probably have nothing to do with her. That’s probably the way it should work.

Seattle Times Interactive head Patricia Lee Smith says she believes the site has unmatched local content and “a uniquely local lens” that non-native search engines probably can’t hope to match in the foreseeable future. “This will also be the first of many advertising trials to connect local businesses with online readers via targeted search advertising,” she says.

Smith also promises that the search initiative is going to go deeper and deeper. The search box, for instance, will eventually be introduced on each of the Times Co.’s marketplace sites.

Quick, what industry gets the highest customer service quality ratings from U.S. adult consumers, according to an August 2007 Harris Interactive poll? No. 1 is supermarkets with 92 percent giving them a good rating, No. 2 is online search engines (84 percent), and tied for No. 3 (78 percent) are computer hardware companies, hospitals and banks. My personal opinions are irrelevant, but I must admit that supermarkets would not have been at the top of my list. What is interesting to me is that 84 percent of respondents said search engines provide good customer service. This piece of wisdom came from eMarketer Daily, which ran a fascinating story on “Search Marketing’s 800-Pound Gorilla.” EMarketer is an expert on giving you enough information to make you hungry for more and then offering the whole report for a fee. In this case, Search Engine Marketing: User and Spending Trends is worth every dollar to anyone who is interested in the search engine business.

The author, David Hallerman, senior analyst at eMarketer, writes:

“However, the term ‘customer service’ is likely used broadly here, since one would guess that the vast majority of people who have used a search engine have never actually spoken with or e-mailed the people running that engine. Most probably, these results imply that people like what they get from search sites.”

Imagine that. There’s no greeter at the front door, nobody to bag your purchases, not even a smile from a candy-striper or a teller. All you get is what you, yourself, are able to pull out of a search engine. I have never built a boat in a bottle, or even attacked a complicated crossword puzzle. But I have done a lot of searching, and when I find what I’m looking for, often on a local search, there is a great deal of satisfaction. In a blog tomorrow, I plan to see if there is any way to compare satisfaction of using a search engine with other ways of finding products and services, such as Yellow Pages or newspapers.

Mr. Hallerman’s article refers to the huge number of people in the U.S. alone who used search engines last year. It’s at least 155 million and that number will rise by 25 million in 2011. Search advertising spending continues to grow, even if it is at a slower percentage pace than in previous years simply because the absolute number is already high. As the chairman of a company that spends a fair amount of money on paid search marketing every year, a key issue to me has been whether I’m getting my money’s worth. People don’t report to us that they are coming to a Kelsey Group conference or buying a report because of a paid search or contextual ad. Forrester’s Research, according to this eMarketer report, would reinforce this. Fifty-nine percent of respondents say they don’t pay attention to search ads, and 36 percent don’t trust them. Meanwhile, eMarketer is predicting that U.S. search advertising spending will grow from $8.6 billion in 2007 to $16.6 billion in 2011.

Consumers are happy. That’s good. And advertisers are continuing to pump more money into search advertising, despite the fact that consumers report they’re not paying much attention to the advertising, or worse. Some of this is clearly the novelty effect and the fact that advertisers want to be on the leading edge. Still, the bottom line is return on investment. This suggests that at some point, perhaps sooner rather than later, Yellow Pages and other traditional media are going to look pretty good compared with some of the new media options.

In a significant development, AT&T’s Yellowpages.com is replacing Yahoo! Local Search for AT&T’s broadband and Internet customers. It is a move that will greatly enhance Yellowpages.com’s position in the space. The company recently told analysts it expects to attract 2 billion searches in 2008 and 3 billion by 2010.

The move is part of a broad multi-year reworking of AT&T’s existing deal with Yahoo! that gives Yahoo! $300 million to $400 million in upfront cash, according to analysts interviewed by paidContent.

It replaces a previous deal that was primarily based on providing Yahoo! with a share of every AT&T broadband user for a co-branded AT&T/Yahoo! portal and sell through of premium services – an arrangement that AT&T has publicly chafed at.

According to published reports, the previous deal brought Yahoo! roughly $300 million in high margin cash flow. A complete collapse of the deal was unlikely, but the renegotiated terms reflect AT&T’s strong position in the company’s many markets like wireless, directories, and increasingly, the Internet.

AT&T is clearly focused on building up its own portal efforts. The new deal will have a portal “powered by Yahoo!.” With the Yahoo! deal completed, it is adding access to its portal and e-mail for all AT&T customers, not just AT&T Internet customers.

The news comes at an interesting time. Last week, the wireless spectrum bids were due and AT&T will clearly be a contender. Further, Google is rumored to benefit substantially from increased mobile traffic from the iPhone available exclusive through AT&T Wireless.

It is unclear if the deal essentially cuts Yahoo! out of being a local search destination site for AT&T customers. In an environment where top portal and search brands are recipients of mobile usage, that seems unlikely. Regardless, it gives Yahoo! more opportunity to sell display and search advertising throughout the AT&T network. It is something that could have strong dividends as Yahoo! battles directly with Google and others. No doubt, retaining tight control of the carrier deck will allow AT&T to steer traffic accordingly.

It is of no small coincidence that last month, AT&T reworked corporate branding to reflect the company’s intended direction. What was once “AT&T Advertising & Publishing” is now being touted at “AT&T Advertising & Search.” The merger between Yellowpages.com and Ingenio, a $250 million transaction, confirms our belief that AT&T is moving the company toward a fully integrated cross-channel marketing company.

It also extends the reach of the Yahoo! portal to the old BellSouth territories recently integrated into AT&T, and extends Yahoo!’s content beyond the desktop to mobile as well – something that will be much more important over time.

According to paidContent, Yahoo! may see declines over $150 million to $200 million in revenue due to the deal’s restructuring. But there clearly is also plenty of upside if Yahoo!’s advertising is widely used, and mobile develops as strongly as anticipated.

We have speculated for some time that AT&T is a natural fit for Yahoo! in terms of an eventual merger or sale. While this news doesn’t sway us one way or another, we do believe these two companies are moving closer together and an eventual marriage of some type is more than a remote possibility.

(This post was co-written by Matthew Booth and Peter Krasilovsky.)

FAST Search and Transfer, whose “enterprise search” makes every element of an organization searchable, is being sold to Microsoft for $1.2 billion after the Oslo-based company severely missed sales goals and was forced last year to lay off a large number of employees. The company has recently sought to extend its role beyond enterprise search by developing AdMomentum, an AdWords-like ad solution.

FAST’s solutions are very focused on B2B, but they have been deployed by a number of local-oriented players, including MediaNews Group, The Washington Post, InfoSpace, Scandinavian publishing giant Schipsted, and the online directory efforts from Deutsche Telekom and Portugal Telecom. These companies used FAST to integrate their structured (news, directory, map, B2B, classified, encyclopedia) and unstructured data (Web, images, news).

Speaking at the Fast Forward conference last year, Reed Business Search President Stephen Baker said companies such as FAST are especially important in the era of user-generated content. The risk of giving control of content to users is that you mitigate the benefits of the Web 2.0 platform (SEO, preferential content delivery, etc.), he said. “The enterprise search solution gives back the control aspect.”

At the same conference, MediaNews Group VP Teresa Lawler said MNG married FAST’s search data with Omniture’s usage data and Tacoda’s behavioral data. “We’re sucking up all that data.”