targeted-local-adsThere’s a race underway among publishers and advertisers to deliver targeted local ads to consumers. Facebook appears positioned to get in on the mix thanks to its new location-aware features, while Google Maps, Foursquare, and Yelp have each dabbled in this area.

The problem, historically, is that these local ads, more often than not, have been sold through direct negotiation rather than taking advantage of the advances in programmatic advertising that have transformed much of the rest of the industry over the last half-decade. Today, only 25 percent of display ads are sold programmatically, according to Jason Fairchild, CRO of Los Angeles based ad-tech company OpenX. Fairchild expects this rate to double in the coming one to two years.

That fact may change today thanks to a new partnership announced between OpenX and YP (fka, YellowPages.com), the local search and advertising company that spun out of AT&T two years ago. Under the deal, YP gets access to the full OpenX stack, including its ad exchange, supply-side platform (SSP), and ad server. Financial details of the multi-year agreement between the two companies were not disclosed.

YP operates a local ad network that includes more than 300 publishers, such as Yahoo, AOL, and Pandora, and reports more than 70 million monthly users in the US to its own YP.com site and mobile apps. The new partnership will enable YP to unify this mobile and Web display ad inventory under a single platform and allow advertisers, for the first time to bid programmatically. YP claims to be the largest local ad platform in the US, capable of reaching 90 percent of the US population.

With end-users searching YP for topics like “plumber Santa Monica” or “moving company Brooklyn,” YP’s display ads will be able to leverage the kind of intent that has made Google’s keyword-based Search ad platform a multi-billion dollar business. YP further bolstered its ad relevancy chops with its recent acquisition of Sense Networks, a location and behavioral targeting startup.

OpenX has been increasing its focus on local advertising of late as the company continues to position itself for a widely expected IPO. The company, which serves trillions of digital ad transactions annually, reports more than $150 million in 2012 revenue but has yet to release its 2013 results.

YP, on the other hand, is already a juggernaut. The company is majority owned by Cerberus Capital Management, which acquired a 53 percent stake in the company for $950 million. YP employs some 3,000 salespeople and generated $350 million in mobile ad revenue alone in 2012, according to EVP and GM of Digital Markets David Lebow. The company claims that it will incorporate its existing direct sales force targeting local advertisers, with OpenX’s programatic technology that is better suited to large national advertisers.

With Internet-connected devices in nearly every pocket in America, location aware mobile ads are more relevant than ever before. By combining its consumer intent data with the efficiency of programmatic ad sales, YP should be one of the more compelling options around. That is, until Facebook launches its widely anticipated mobile ad network.

[illustration by Brad Jonas for Pando]