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Competition is heating up among online ad channels and Yahoo has thrown the latest log on the fire with yesterday's announced beta test of a newly expanded network of Web pages for contextual ads.

The U.S. test will broaden the reach of Yahoo Search Marketing ads to small and mid-sized Web content sites. Right now, Yahoo's Content Match service places content-related ads on 160 large Web sites such as CNN and ESPN and splits the pay-per-click fees from those ads with the site operators. By comparison, thousands of Web sites accept ads from Google's AdSense publisher network on the same revenue-sharing basis. AdSense accounted for about 47% of Google's second quarter revenue, or $630 million--three-quarters of which was sent on to its publishing partners. Yahoo does not disclose revenue figures for its Web ad network.

Under the new beta test, Yahoo will invite 2,000 sites to join its Yahoo Publisher Network. A self-service Web site will let publisher specify the types of ads they think are most relevant to their readers—and those they don't want to run.

"If you run a travel blog, you may know that your readers won't be always be clicking on travel ads but may also be interested in cooking," said Will Johnson, general manager for Yahoo Publisher Network Online. "So you as a publisher would want to have the kind of control that could target your audience with those ads too." That human control, added to the automated process that matches ads to the targeting specifics of the page content, should make the Yahoo program more lucrative for publishers and more qualified for advertisers, he said.

Publishers will also be able to contact the Yahoo program directly by phone, as opposed to the e-mail contact they now have with Google's AdSense network. And Web publishers who also do search marketing with Yahoo will be able to have their contextual ad revenues go directly into their search marketing budgets, if they wish.

Participants will also get access to an "Add to My Yahoo" button that will let their visitors add their site to personalized pages on the highly used My Yahoo portal, which distributes content via RSS feed. Publishers will also be able to add the Y!Q beta contextual search feature, which lets users find content related to the articles they're currently reading via a pop-up tool, without leaving the operator's site.

Yahoo said that future enhancements to the publisher network would include the ability to add Web sites to the "My Web" personalized search function, which lets users share favorite Web pages among their social network and communities. Yahoo is also testing the ad potential of both RSS feeds and the Y!Q contextual search product.

As part of the beta test, Yahoo says it will extend partnership invitations to a range of Web sites, from the largest down to some small but highly specialized niche sites. "We're interested in testing our product across multiple categories and a range of sizes of publishers," Johnson said. "We're looking at leads to find a variety of quality sites--travel or automotive, blog or edited content, high traffic or low—to compile a matrix of sites so that we learn what we can really do with this product."

In reaching down to 2,000 new Web sites, Yahoo seems sure to include some of the more widely read blogs in the invitations to its newly expanded network that should emphasize the attention blogs have been receiving lately as vehicles for online advertising.

"People are gravitating toward blogs and toward RSS," said Josh Stylman, managing partner with search marketing firm Reprise Media. "If I'm an advertiser, I want to be where my audience is. Savvy marketers realize that [blogging] is inevitable, so they're looking for ways to work with the inevitable rather than fighting it off. Programs like this present a highly scalable way to get your message in front of people who might be interested in it."

The Yahoo ad test follows an announcement on Monday that Ask Jeeves will begin selling its own pay-per-click search ads directly to marketers instead of relying solely on Google for those listings. And Microsoft is widely expected to announce next week that it will move its own test of an auction-based keyword product, MSN Keywords, out of its overseas beta and into a U.S. test, on an invitation basis similar to the Yahoo Publisher Network trial.

Most online marketing agencies are enjoying the pace of innovation. "Competition is fantastic for marketers,” said Will Margiloff, CEO of integrated marketing firm 360i.

"You want different outlets to provide different results and increased reach for your advertising customers. Competition pushes [the search ad networks] to add features both for the publishers and the advertisers, and that ultimately helps both those constituencies."