Yahoo isn’t backing down in the fight for dominance of
the online advertising market. The company today announced its intention to acquire the remaining 80 percent of Right Media it didn’t already own for approximately $680 million in cash and stock.
Right Media runs an advertising exchange that offers price transparency to both
publishers and advertisers, which is in contrast to an advertising network like Google’s AdSense. Yahoo acquired 20 percent of it in October.
The deal could end up creating lower prices for non-premium online ads and
put pressure on Google to make its closed-bidding process more transparent.
And it will allow the company to strengthen its leadership position in the online display advertising market and position itself as a trusted intermediary between advertisers and publishers.
The move comes two weeks after Google acquired DoubleClick for $3.1 billion.
Yahoo CEO Terry Semel said the benefits of RightMedia’s exchange include a greater choice of inventory and audiences for advertisers, as well as a greater demand for publishers. He said that Yahoo will increase its participation in the exchange as both a buyer and seller to help increase the amount of inventory available through the exchange.
“We believe Yahoo’s more open approach is a clear differentiator from others
in the industry to provide significant benefits to advertisers and
publishers,” he added during a conference call this morning to announce the deal.
He also said that the acquisition is a key step towards executing its
long-term strategy to engage with customers both on and off the Yahoo network.
Semel noted that Yahoo has extended its ad business to other networks,
including the offline world, citing its relationship with eBay and
an agreement
signed last year with a consortium of 150 newspapers.
Sue Decker, who heads the advertising and publisher group at Yahoo, said the
addition of Yahoo’s content and ad inventory to the platform will help it
gain critical mass. “Our enthusiasm for this transaction is predicated on
our ability to establish an immediate market presence,” she said during the
call.
She said that Yahoo’s exchange will be open and neutral and will help
advertisers find non-premium ad inventory without paying intermediaries.
A lot of non-premium inventory gets bought by advertising networks and
resold at premium prices, with price lifts of over 50 percent, she said. “We
expect that inventory to become more competitive in pricing over time.”
The move comes at a time when the market for graphic ads is booming. “We
believe that the segment for display and content match grew more than 50
percent in ’06, and we expect it to grow approximately 30 percent,” this
year, said Semel.
Charlene Li, an analyst with Forrester Research, said Yahoo will take a position
as the broker between publishers and advertisers, while “Google runs the
risk of being only the delivery mechanism. Nice end run on the part of
Yahoo.”
She added that the acquisition “puts pressure on Google’s AdSense network to
be more transparent.”
