Sunnyvale (CA) - Yahoo has launched "SmartAds" display advertisements which target customers based on what they search for and where they are located. The ads are developed on the fly and try to dish up retail locations that are close to the user.

So how exactly do these ads work ? Yahoo gives an example of a person searching for hybrid automobiles. Usually such a search would give a mishmash of generic hybrid auto dealerships across the nation, but Yahoo says that it can now use the user’s default weather location - the assumption being that you probably live there - and serve up dealerships in the user’s hometown.

In another example, Yahoo says someone searching for Las Vegas information would get cheap flight advertisements while looking in Yahoo ! News.

It doesn’t take a genius to see how this can benefit both the user and the advertiser. A close-by car dealership ad is much more likely to be clicked by web surfers "in the mood" to buy a car today. Certain industries, like restaurants, should also see huge gains in click rates - someone with a grumbling stomach is almost assuredly going to click on a local steakhouse ad.