Yahoo is set to unveil a major marketing campaign to reset advertiser and consumer perception of the long-troubled company during Advertising Week in New York, which starts a week from tomorrow.

According to numerous sources BoomTown has spoken to about the campaign, Yahoo (YHOO) is–at least with advertisers–going to focus on stressing the size and scale of the Internet giant.

The details of the plan will be made public Tuesday, Sept. 22, at a press conference.

It will take place immediately after a keynote speech–titled “Yahoo’s Consumer Revolution…Round II”–that the company’s new CMO, Elisa Steele, is set to deliver on the second day of the Interactive Advertising Bureau’s MIXX conference.

MIXX is a two-day event, run by IAB, focused specifically on online advertising.

Yahoo CEO Carol Bartz is also going to be attending Advertising Week–during which all the major players in the advertising business gather in Manhattan for a series of events–for a plethora of meetings with big Yahoo clients.

It is likely she and several other senior Yahoo execs will be at the press conference, sources said.

That press event will also include Penny Baldwin, a well-known industry exec Yahoo hired as its SVP of global integrated marketing and brand management in July.

The main message Bartz is set to deliver is that Yahoo is a powerhouse unlike any others on the Web when it comes to online display advertising.

And, in fact, Yahoo–despite all the internal and external turmoil it has undergone in recent years–remains one of the largest sites on the Internet, and is the top player in what is also called graphical advertising, as well as online media and communications.

“The whole push seems to be to remind people of vibrancy of the brand and exactly how huge its reach is,” said one person who has seen parts of the presentation. “It is less Yahoo is back than Yahoo has never left.”

Sources also noted that Yahoo is likely to stick to its plan to push the idea of “your home on the Web” to consumers, which I had previously posted about earlier this summer.

The idea of the Silicon Valley icon being the key hub destination for Internet users does dovetail with pushing its size to advertisers–major marketing messages that will also likely cost a pretty penny.

They will have to–Microsoft (MSFT) has been in the midst of a $100 million campaign for its new Bing search site and will likely spend more when it unveils updates to the service, dubbed Bing 2.0–within the next few weeks.

The company showed the changes it showed to its own employees last week, which was the subject of much tweeting on Twitter.

Yahoo will apparently give more specifics as to the spend for the marketing push at the press conference.

But, many sources said, the company is already out in the advertising market now, buying tens of millions of dollars in advertising online and offline to hawk Yahoo in print, on television and elsewhere.

(Full disclosure: Sources said that campaign will include The Wall Street Journal network, which includes this site.)

“It’s dramatic,” said one source about the marketing outlay.

Since she got to Yahoo, Bartz has continually stressed the need to promote Yahoo products and services more, including in an interview last week on CNBC (you can see that longish video here).

And, in the July earnings call for Yahoo, Bartz said: “In addition, we’re hard at work on plans to reposition our most valuable asset: Yahoo’s brand. Our Q3 plans include an initial wave of incremental marketing spend which will increase substantially into Q4 and next year.”

Also, in a Q&A in the same call, she added more about the long-term nature of the spending on branding:

“The branding and our whole campaign of advertising is just starting; however you have to understand that this is an ongoing campaign so it’s not transient at least for the next year or so. We’re really going to move to reposition the Yahoo brand and Yahoo Company, so right now, consider that as cost that’s in the system.”

What Bartz and other Yahoo execs will likely stress less is search, due to the search deal Yahoo struck in July with Microsoft in which the software giant will take over the back-end technology and Yahoo will sell search ads for both companies.

The company will compete with both Microsoft and Google (GOOG) in garnering the search market still, once the partnership is approved by regulators, with Yahoo focusing on differentiating itself via innovative user interface, design, features and functionality.

Yesterday, Yahoo celebrated the fifth anniversary of the launch of its own search engine with some good news about its market share and by jazzing up its paid listings today with a plan to include pictures and video.

Will the “rich” ad search product work better, a digital little engine that could?

We’ll see, although it seems the troubled Internet company is already doing better without all the bells and whistles.

After years of declines, according to a new report from comScore, Yahoo’s share in the U.S. continued to scratch its way back slowly, from a low of 19.6 percent last June to 21 percent in January.

Better still, according to comScore (although not in other recent surveys like Nielsen), Google (GOOG) lost some juice, declining to 63 percent from 63.5 percent in December of 2008.

Microsoft (MSFT) search rose a tiny bit to 8.5 percent. But that’s still essentially pathetic for a company that is spending so much and trying all sorts of new iterations of its search product–from giving cash back to creating more niche search–to boost share.

For its part, Yahoo (YHOO) has decided to integrate images and video with its search ads, which have long been text-based. Yahoo has been working on various versions of this and other improvements to search for a year.

Both Google and Microsoft have tested similar versions, but have not launched them widely, for a variety of reasons.

Thus, it is Yahoo that will be first in a major rollout of what one company insider jokingly described to BoomTown as “a mutant marriage of search ads and display.”

Paid search, a business where advertisers pay for relevant links on a larger search page, has been largely dominated by Google, with Yahoo’s share one-seventh the size, even as it dominates in selling online graphical advertising called display.

But the display business has been hard hit in the weak economy as advertisers have pulled back drastically on banner advertisements and the like, and as evidenced by a decrease in that business that Yahoo announced in its most recent quarter.

Thus, the idea is now to apparently make paid search richer, giving it the cool-looking attributes of display and the more measurable qualities of paid listings.

But whether this yields better click-through rates on Yahoo–and, more to the point, fends off calls by investors to take a giant sum of money from Microsoft to hand over its search business–is still unclear.

Still, it’s nice to see Yahoo search–which also recently added a “search pad” for users to conduct online research more easily–trying to compete with a little more panache after, badly, copying Google for so long and with so little result.

In other words, after five years of losing, it’s about time for some new moves.

Last week–in a clear sign that BoomTown has spent way too much face time in front of the idiot box–I compared the endless bickering back-and-forth between Yahoo CEO Jerry Yang and Microsoft CEO Steve Ballmer to the annoying push-me-pull-you antics of Ross and Rachel on the television show, “Friends.”

But the continuing discussions between Yahoo and AOL execs over the merger of their struggling online companies have their own TV comparison–the never-ending roundelay on “The View.”

In other words: Blah, blah, blah. Chitter-chatter. Pointless arguing. Chin-scratching. More blah, blah. More chatter. Blah.

Thus, there were still more discussions going on at Yahoo HQ this past week about the possible deal, in which Yahoo is code-named Yale and AOL Amherst.

Along with Yahoo CEO Jerry Yang and President Sue Decker, the key Yahoo (YHOO) execs involved in pushing forward the effort, are U.S. head Hilary Schneider, and Greg Mrva, a former investment banker and analyst who is in charge of mergers and acquisitions at the company.

As I previously wrote, the main suits involved in repping the Time Warner (TWX) unit are AOL President Ron Grant and Time Warner M&A SVP Jim Burtson.

“More of the same discussions about how it would all integrate,” said one source close to the situation at Yahoo. “Same as always.”

Added an AOL source, in what I consider the understatement of the year: “There has not been a lot of clarity in decision-making at Yahoo.”

Big surprise: Still no deal!

That’s unusual to me, since all the true obstacles–namely, the collapse of the controversial search advertising deal Yahoo tried to strike with Google (GOOG), AOL and Yahoo’s results coming in as weak as expected and, lastly, a definite lack of interest from Microsoft (MSFT) to rebid for Yahoo–are no longer in the way.

And, of course, Yahoo’s share price–the stock has settled into the depressing $11 to $12 range that gives the company a $15.7 billion valuation–is simply not going up any time soon.

So, if the deal is to be done, the price–or percentage, really–will probably have to be based on today’s reality, which is a very bleak outlook in the graphical online advertising business in which Yahoo plays most strongly.

That’s why dithering is a problem for this possible marriage, despite all the obvious complexity.

For one, it takes all the air out of any momentum such a combination could produce for either Yahoo or AOL, which will be much needed in the current economic environment.

In fact, such an econalypse is actually the perfect cover to try to pull this turnaround–and it is exactly that–off, given few investors or media will expect much from the merger for a while and be more forgiving.

In addition, the slash-and-burn integration needed to drastically refocus the new company–hopefully on three things only: advertising, content and communications–will be easier now more than later when the financial outlook improves.

“Things are going to get a lot worse than people think,” said one AOL exec. “So, this is a really good time for a reset and for cleaning things up.”

It is also easier now to bring in fresh ideas and new leadership to a combined Yahoo/AOL, as a new company will surely give many talented outside execs who have avoided both separately a reason to look again.

I could go on as to why this deal should move forward quickly, but here is one piece of great advice I got several years ago, from a well-known Internet entrepreneur whose company had just taken a big gamble by buying a controversial but fast-growing start-up in a key category.

At the time, many decried the move as too risky and too pricey and too thoughtlessly done. When I asked the exec about this, he did not argue, but offered this:

“No one really knows how anything is going to turn out, no matter how long they think it through,” he said. “But, I believe it will all work out if we execute well on the promise, because I did know one thing for sure: It was the right direction.”

And, indeed, while you can puzzle over a map endlessly, knowing the right direction to go in is the only thing one can be sure of in almost any circumstance in life.

Therefore, all Yahoo and AOL have to do is pick a path–whether it be to move on or merge–and just go.

By tomorrow would work for me.

In the meantime, below is a video I did of Yahoo’s Yang onstage at the Web 2.0 Summit in San Francisco last week, talking about the travails of the last year.

It includes him saying Microsoft should still buy Yahoo, which felt a little too much like a plea to me. (I happened to be sitting next to some Microsoft execs during the speech and they did not look too moved by the begging.)

But judge for yourself–here’s the video (yes, the Web 2.0 Summit organizers did flash a picture of a jar of Jif peanut butter as a joke–ha, ha, referring to the infamous Yahoo “Peanut Butter Manifesto”):

The one truly interesting factoid in The Wall Street Journal’s piece about the efficacy (or lack thereof) of Facebook’s engagement ads today was this one about its results in the graphical ad business versus rival MySpace:

The company says 70 of the U.S.’s 100 largest advertisers have advertised on its site since 2007. But its share of total number of U.S. online display ad views was just 1.1 percent, according to market research firm comScore Inc., in its most recent report in June.

News Corp.’s Fox Interactive Media Unit, which includes rival MySpace.com, is the market leader with 15.9 percent of display-ad spending, according to comScore.”

This is what is known in the BoomTown lexicon as a classic What-chu-talkin-bout-Willis? moment.

That’s an especially astonishing number, because MySpace has been steadily losing audience leadership and, more importantly, the growth race to Facebook over the last year (see the Journal graph here).

Nonetheless, MySpace, the unit of News Corp. (NWS) that makes up much of FIM, seems to be making up for it in actually selling the ads needed to make social networking profitable.

And, while Facebook has been beefing up its ad sales force on Madison Avenue–it turns out that it is a media company, after all, and not a utility!–so has MySpace, mostly from ex-employees of Yahoo (YHOO), which still dominates the category, despite its numerous missteps.

Both Facebook and MySpace will, as will everyone in the graphical ad space, get hit hard by the econalypse in the advertising space online, of course.

But, given these stats, Facebook clearly has to start seriously upping its ad performance to at least match MySpace.

(This site, as well as The Wall Street Journal, are also owned by News Corp.)

Okay, here is what is true at this moment about Yahoo, which is sure to get even more caught up in the maelstrom of rumor and innuendo about its fate after the collapse of its controversial search advertising deal with Google today.

While Yahoo’s corporate gyrations are beginning to feel like there are more twists and turns than a Spanish telenovela, the actual situation is a lot less sexy and definitely more grim.

Simply put: Yahoo (YHOO) is in the midst of a very serious resetting of its business that might or might not go well, after years of mismanagement and damaging external forces over which it sometimes had control and sometimes not.

And there are valid questions about whether its current leadership is up to the task of reviving Yahoo, after one painful stumble after the next.

Nonetheless, Yahoo remains one of the Internet’s most trafficked and profitable sites and its products are uniformly excellent.

And, while it has lost share in search, it is still No. 2. In addition, even though its graphical ad business is suffering badly in the weak economy, it is still the best on the Internet.

But, let’s face it: What a mess.

Thus, in the interests of clarity, here is a rundown of the situation.

1. Yahoo CEO Jerry Yang is not stepping down. In fact, I will soon be headed out the door to see him onstage at the Web 2.0 Summit in San Francisco later this afternoon.

In fact, he seems determined to stay, until someone throws him out. And who would that be?

Investors had their chance at the annual meeting and failed; so did activist shareholder Carl Icahn, who is now on the Yahoo board and unable to agitate publicly.

Maybe employees will revolt on the Sunnyvale campus in a purple rage? Doubtful.

In a two-part interview with BoomTown after its sad-sack third-quarter earnings were released, Yang was telling the truth 100 percent:

BT: You have been attacked a lot recently for not selling Yahoo to Microsoft, Yahoo’s low stock price and your management of the company–why do you think you are the best leader for Yahoo going forward?:

Yang: I think if you look at what the company is doing and what we have been going through and the story we have been telling, we have done most, if not all, of what we set out to do, starting last year.

My dream is to transform Yahoo as a platform and product company and I think we are on the way to really doing that. And a lot of what we have been doing is starting to translate into value–whether it is our front page, our profiles, our email or our APT ad platform.

And, in this uncertain environment, I think I am absolutely the right person. Times like this require a leader who really understands this company and its customers, and I think I do. The world is a different place today than even a month ago and I think I am the best person to guide Yahoo through this volatile time.”

2. The collapse of Yahoogle does not mean that Yahoo will now be automatically forced to turn to Microsoft (MSFT) to strike a similar deal, and on terms with no leverage.

After all, Yahoo is still the No. 2 player in search by far after Google (GOOG), with Microsoft trailing badly.

Of course, it must now contemplate spending a lot on keeping that spot, and it is not good to be caught between two warring moneybags.

3. Microsoft does not want to buy Yahoo and will not show up with another bid, unless the stock truly tanks and it becomes such an amazing bargain that CEO Steve Ballmer has to get over himself.

Microsoft is now only interested in Yahoo’s search business and there might be more talks to revive that offer in the future.

But, no matter what analysts pontificate about, neither is under any “pressure” to act fast. It is a crappy economy and everyone has cover to do badly for a while and scuttle along.

4. Yes, a merger deal with AOL looks more likely than not now, especially with the Yahoogle uncertainty out of the way.

Why? Well, Yahoo execs like it and Time Warner (TWX), which owns the AOL online unit, needs it. AOL’s poor results today should underscore that fact.

While integration issues are complex, it also brings together some of the biggest communications, advertising and content properties on the Web.

Done right–and that is a big if with both these crews in charge–it might work and give the pair the much needed boost they desperately need.

Done wrong, well, the soap opera just continues on endlessly.

Silicon Alley Insider’s Henry Blodget sounds an important horn again, namely, outlining in graphically ugly detail why graphical advertising-based online businesses are in big trouble.

In his post, Blodget shows some convincing graphs about past performance trends, including the years after the first bubble burst, from 2000 to 2002, which could augur what is to come for the display business.

That means uh-oh for companies like Yahoo (YHOO), CNET (CNET) and all the many start-ups like Facebook that are focused on display ads as their main revenue source.

Search advertising, he notes, seems to be in better shape to face off the stiff winds to come, although most of that money goes to the dominant Google (GOOG) in this arena.

Money quote:

How do we know online display ad spending will fall? Because by Q2 of this year it had already slowed sharply–to mid-single-digit growth–and that was before things even began to get bad.

According to IAB, the growth of non-search online ad spending (display, classifieds, lead-gen) was 14% in Q1 and 5% in Q2. 5%! That’s before the horrific fall-off in consumer spending in September. We’ll be lucky if non-search spending is up year-over-year in Q3. By Q4, it will almost certainly be negative.

Blodget is predicting a 10 percent decline next year and more in 2010, which is–considering that the entire economy is in trouble this time–probably conservative to me.

As to all those start-ups who have been telling me Advertising, of course as their business plan, it might be time to get another plan for what is to come.

To be fair, the whole market was dragged down today due to worries about a deepening recession. But Yahoo’s ever-decreasing share price has got to have the company and its investors mighty worried.

Hitting lows not seen since the dot-com doldrums of 2001 and 2002, Yahoo closed at $15.58–down $1.38 or 8.14 percent–giving the troubled Internet giant a market cap of just $22.08 billion.

That is almost exactly half of what Yahoo leadership could have gotten if the company had accepted a takeover offer made by Microsoft at the beginning of February.

Nonetheless, even at these bargain-basement prices, sources at the software giant said that Microsoft (MSFT) CEO Steve Ballmer has declared repeatedly at internal gatherings recently that he is not going to make another offer for Yahoo (YHOO) no matter how low it goes.

This seems a little stubborn to BoomTown–a kind of taking-my-marbles-and-going-home attitude–especially given Yahoo still has one of the most highly trafficked sites on the Web and some of its best-known products and services, as well as being the No. 2 player in search.

And Ballmer might well be bluffing, of course. After all, a bargain is a bargain.

Nonetheless, it underscores the reality that Yahoo is probably truly on its own now and must sink or swim on the initiatives and leadership of CEO Jerry Yang and President Sue Decker.

As I have written repeatedly, the pair has increasingly less time to act and must show perceptible improvements in results.

As at most Web companies, most analysts agree the third quarter is probably not a disaster for Yahoo. Instead, all eyes are on the fourth quarter, which is going to be most definitely impacted by the current economic slowdown.

Yahoo has recently hired a former Microsoft exec–Joanne Bradford–to lead its advertising efforts in the key U.S. market. And, while she is well regarded on Madison Avenue, Bradford has her work cut out of her, especially in the hard-hit online display advertising business.

Yahoo also is on pins and needles to see if the Justice Department will try to put the kibosh on its search ad outsourcing deal with Google (GOOG).

Yahoo is hoping to get a big boost in revenue from the partnership, which has many critics. In the current economic environment, the government might be loath to slap down any sign of financial activity, but the uncertainty is not good for Yahoo.

Yahoo’s declining stock price is also sure to impact its talks with Time Warner (TWX) over acquiring its AOL unit. Yahoo does not want to pay anywhere near the $10 billion that the media giant had previously floated as its price for the once-mighty, now-beleaguered AOL.

But Yahoo’s declining market value means it is likely to be able to pony up less and less.

With continuing rumors of layoffs, which I posted about two weeks ago, doing more with less is going to be business as usual at Yahoo, it seems.

And, in fact, heads of various business units at Yahoo have been given marching orders to cut costs, which are quite substantial.

“We might not make all the cuts requested,” said one exec. “But it is going to hurt.”

It is not so apt, if you think about it, that Yahoo has finally put up the details of its new system to let customers buy and sell display advertising–now called APT–right smack in the middle of the most serious financial meltdown of the modern era.

That’s because the economic crisis is likely to become a whirlpool that will be hard for any ad business to avoid, even the often recession-proof digital sector.

But it is Advertising Week in New York and, BoomTown supposes, the show must go on (it’s not as if they could suspend it, like a critically important Presidential debate or anything).

Actually, “ironic,” I suppose, is a better word than “apt,” because the existence of such a system–as a kind of Google-like way to deliver graphical advertising–is extremely vital to the next phase of the online ad game.

In Yahoo’s case, APT would service its sites, as well as big sites like eBay (EBAY) and several hundred newspaper sites, in what one can only hope is a cohesive manner rather than the patchwork way it is done now.

In order to reach many places across the country, for example, a national advertiser now has to potentially make hundreds of buys, which can be highly inefficient.

The other option is to use one of the too-many ad networks. But they often don’t let an advertiser know exactly where an ad is being placed, and it can sometimes create something called “channel conflict” between a publisher and an ad network.

This chaos has long been a problem in the online display business, which has been growing, although not with the same force or overall impact as the search ad business dominated by Google (GOOG).

Thus, the situation begs for clarity and for getting scale built into the system, which can only be imposed by big players like Yahoo (YHOO)–or Google or Microsoft (MSFT), both of which are working on their own systems.

Unfortunately, while the search ad market has a better chance to weather the current economic crisis, the online display market is a horse of a different color.

Many speakers at Ad Week underscored the obvious.

Former Yahoo ad head Wenda Millard, now co-CEO of Martha Stewart Living Omnimedia, said in a panel that the Wall Street crisis will have “pretty severe implications for medium-sized and smaller businesses and consumers.”

It was an opinion expressed by many others in the online space who attended the event, most of whom also tried to note in some fashion that the digital sector has a better chance to weather the expected slowdown than other media like magazines.

That might be so. But as one top digital exec correctly noted to me after the events of this week, which have deeply impacted banks and Wall Street firms, it will be hard to escape the suction-like pull of sinking ships:

“Like it or not, we’re all financial stocks now.”