Apr-30-2007

Yahoo! buys! ad! exchange!

(topic overview)
CONTENTS:

Yahoo, which bought a 20 percent stake in Right Media last October, will pay approximately $680 million, in equal parts of stock and cash, for the remaining interest in the company, which is based in New York. (More...)
The Right Media buy follows Yahoo's $40 million investment for a 20% stake in the company in October 2006. (More...)
The company said it planned eventually to sell all the nonpremium ad space on Yahoo through the exchange, a move executives said would enhance revenue. (More...)
"We are very excited by the prospect of becoming part of Yahoo!, the market leader in display advertising, as it looks to revolutionize the media buying and selling landscape." (More...)
Google is best at selling text ads that appear alongside search results and on other Web sites. (More...)
Spokeswoman Helena Maus didn't immediately return a call seeking comment after business hours. (More...)
Yahoo is search and content and applications. (More...)
Given the higher potential for online media to induce users to click on an ad and be redirected to a specific destination, advertisers are going to be drawn to the online 30-second spot. (More...)
The potential risks and uncertainties include, among others, the possibility that the transaction will not close or that the closing may be delayed; and that the anticipated benefits to Yahoo!, advertisers and publishers may not be realized. (More...)
Ad servers--the tools that place ads on a page--are neither interesting nor fun to play with. (More...)

REFERENCES

Yahoo, which bought a 20 percent stake in Right Media last October, will pay approximately $680 million, in equal parts of stock and cash, for the remaining interest in the company, which is based in New York. "The acquisition, to us, is a key step toward executing our long-term vision to build the leading advertising and publisher ecosystem both on and off the Yahoo network," Terry Semel, Yahoo's chief executive, said in an interview. [1] Right Media runs an online advertising auction site, Sunnyvale, California-based Yahoo said today in a statement distributed by Business Wire. Yahoo acquired 20 percent of privately held Right Media in October, allowing Yahoo to sell ads more efficiently on its less-visited Web pages. Online exchanges allow Web publishers to sell advertising slots that they weren't able to market.[2] Yahoo! Inc., a leading global Internet company, today announced that it has entered into a definitive agreement to acquire Right Media Inc., creator of the Right Media Exchange. The acquisition of Right Media will build upon Yahoo!'s leadership in online advertising and is a key step towards executing the Company's long-term strategy to transform how online advertisers connect to and engage with their customers - both on and off the Yahoo! network.[3] Semel said the deal would help improve the company's Panama ad network. Right Media CEO Michael Walrath said in his "blog": "It's important to reiterate publicly that the acquisition will in no way afford Yahoo! any unfair advantage in the Exchange.[4]

The deal consideration will be paid out in equal parts of cash and stock. Founded in 2003, the Right Media Exchange is an emerging online advertising exchange, which aims to provide a virtual platform to bring together buyers and sellers of Internet ads and help them execute transactions.[5] Right Media runs an exchange for ad agencies to buy advertising inventory. It claims to offer a more transparent way for advertisers and publishers to deal with their ad inventory - because inventory is auctioned you can see who is paying for what.[4]

The Right Media buy follows Yahoo's $40 million investment for a 20% stake in the company in October 2006. Yahoo generates nearly half of its $1 billion-plus quarterly revenue from selling display ads online. Companies use display ads, such as web banners to promote their brands. [5] The two companies are increasingly competing for a piece of the market for selling and brokering all types of ads across the Web. By buying Right Media, analysts have said, Yahoo would accelerate its own efforts to sell and broker ads on other sites. Those efforts began taking shape recently, after Yahoo reached agreements to sell ads on eBay and on some 264 newspaper Web sites.[1]

Yahoo today announced that it has entered into a definitive agreement to acquire the rest of Right Media, for $680 million, a deal which highlights how Internet companies are betting big on new approaches to extend their online advertising reach.[6] Yahoo plans to acquire Right Media, a privately held company that runs an advertising marketplace, in part to bolster its position as a seller and broker of ads.[1] Yahoo! is paying $680m for the remaining 80 per cent of Right Media - made up of half shares and half cash. Terry Semel, CEO of Yahoo!, said in his "blog": "Right Media connects the various online ad players in an open and efficient way. Its marketplace provides a world where non-guaranteed inventory is bought and sold without barriers - an entirely free flow of information."[4]

NEW YORK: Yahoo Inc. is buying the rest of Right Media Inc. for about $680 million, hoping to strengthen its advertising services business. It has agreed to buy the remaining 80 per cent holding in the company it did not own.[7] The Norwegian based company said its FASTMedia software platform is the first to match content to individual users, in addition to supporting all types of online advertising models. The suite of applications is designed specifically for media companies and enables them to run their own ad networks. FAST said that its top 35 media customers already generate search traffic that exceeds that of Yahoo![8] GOOG and YHOO and MSFT are way behind in targeting local markets. If media companies run their own advertising networks they will have a far more favorable ad pricing environment plus opportunities to sell additional services.[8]

The company said it planned eventually to sell all the nonpremium ad space on Yahoo through the exchange, a move executives said would enhance revenue. [1] "What we look forward to do as an owner is put more inventory into that pot to help create a more vibrant exchange and create better pricing for everyone," Semel said. Yahoo said that after the acquisition it would increase its participation in the exchange as both a buyer and seller of ads.[1] More than 20,000 buyers and sellers trade over four billion impressions a day on the Exchange. Right Media offers a range of solutions that help these businesses operate more efficiently -- from simple exchange access to the ability to create their own exchange.[9] A level playing field is one of the foundations of the Exchange and its success - it remains level. The fact that the Right Media Exchange will operate as an independent division of Yahoo! ensures this."[4]

Shareholders of Right Media will be paid in roughly equal parts in cash and stock, and employee stock options and other equity awards will be assumed by Yahoo, Yahoo said on Monday.[10]

The portal giant bought a 20 percent stake of Right Media in October for $45 million and now plans to acquire the remaining 80 percent, it said.[11]

"We are very excited by the prospect of becoming part of Yahoo!, the market leader in display advertising, as it looks to revolutionize the media buying and selling landscape." [3] We believe that Yahoo!'s open approach is a clear differentiator from others in the industry and provides significant benefits to advertisers, publishers and Yahoo! itself." Yahoo CFO Susan Decker is already referring to her company as the "the industry's partner of choice and as a leader in both search and display advertising."[12] "Further Yahoo!'s goal to create the industry's most open, accessible and vibrant advertising marketplace, which will help democratise the buying and selling of digitally enabled advertising."[13]

Google is best at selling text ads that appear alongside search results and on other Web sites. Yahoo, which has lagged Google in search, is a leader in selling graphical ads, mostly on its own sites. [1] Increased liquidity to allow advertisers to more efficiently ascertain the true value of display ad inventory, and generate greater returns for Yahoo's own display inventory.[12] Some analysts believe that revenue growth from graphical display ads, like banners, is slowing for Yahoo, amid intense rivalry from Internet peers.[5]

Ad revenue in the period rose 6 percent to $1.47 billion, and net income fell 11 percent to $142 million, the company said on April 17.[2]

The search giants keep about 20 per cent of total advertising revenues. This revenue share is skewed towards a handful of large media companies with the clout to negotiate better deals.[8] A lot of people have been reflecting on the deal, what with Microsoft and AT&T; crying foul, and Yahoo! reporting a first quarter that underscored exactly why it's trailing Google in online advertising.[14] Web owners and small business wishing to take advantage themselves can use link building. Yahoo has expanded its advertising deal with U.S. newspaper publishers.[15]

Spokeswoman Helena Maus didn't immediately return a call seeking comment after business hours. Yahoo's first-quarter profit and sales fell short of analysts' estimates after its new advertising program, Project Panama, didn't generate the revenue gain some investors expected. [2] Yahoo! did have revenue of $1.672 billion, and operating income of $169 million.[16]

Yahoo is search and content and applications. Sure, Yahoo media czar Lloyd Braun wasn't able to turn it into an interactive TV network, and lost his job in December, 2006. The notion of a global buy on a network with monster page views and great insights into their audience makes a rich media buy on Yahoo, combined with search and banner, attractive to a marketer. [14] The competition is for a very lucrative businessrunning massive advertising networks for global media companies.[8]

Given the higher potential for online media to induce users to click on an ad and be redirected to a specific destination, advertisers are going to be drawn to the online 30-second spot. This is great news for agencies that were worried about their TV practice. There is an avalanche of client demand headed their way for short, smart Web videos to stick into big interactive marketing units. [14] Quigo is a great company, out of Ziff-Davis, with a very aggressive attitude about niche paid search. As The New York Times noted on Apr. 17, all the ad server alternatives got a nice share-price boost thanks to Google putting a value and some attention on their market.[14] The text ads that show up next to each Google search bring in billion of dollars in revenue every quarter. What had made them so successful? Google's search engine serves the customer with the most relevant search results as fast as possible -- and customers have noticed.[17]

Sure, Yahoo has Panama, Microsoft's MSN is getting it together, and lots of nimble little mammal vendors like Quigo are providing paid search capabilities to publishers who don't want Google to say "all your base are belong to us".[14] With Microsoft's share of the search market sitting at about 10%, the failure should not be surprising. The only comfort that Microsoft can take is that its growth rate online was slightly better than Yahoo!'s which only moved up 7% in the first quarter.[16]

The potential risks and uncertainties include, among others, the possibility that the transaction will not close or that the closing may be delayed; and that the anticipated benefits to Yahoo!, advertisers and publishers may not be realized. [9] Yahoo is an entirely different animal from Google. It is a true content and service network.[14] Google's move has sparked controversy, with rivals complaining about the deal, while civil rights groups have also launched a challenge.[18]

Ad servers--the tools that place ads on a page--are neither interesting nor fun to play with. Those who do use them usually hate them and trade tales of their quirks and bad behaviors like grizzled war veterans. Which explains why ad ops is the most thankless job in the interactive world, even though it's the one with the highest stakes. [14]

REFERENCES

1. Yahoo to buy ad company in Bid to compete with Google | CNET News.com
2. Bloomberg.com: U.S.
3. boerse.de Börse, Kurse & Charts, Depots, News & Analysen, Expertenkolumnen, Termine, Wissen, Premium, Aktienbrief, Trendbrief, Aktienclub
4. Yahoo! buys! ad! exchange! | The Register
5. Daytrading, Eminis, Forex trading, Swing Trading TOP STORY - 537906
6. TECH.BLORGE.com » Blog Archive » Yahoo to buy net ad company, Right Media
7. Yahoo to buy rest of online advertising exchange Right Media
8. » FAST battles GOOG and YHOO for media markets, says its search traffic larger than Yahoo! | Tom Foremski: IMHO | ZDNet.com
9. Noticias Infobolsa / Titulares
10. Yahoo to Buy Rest of Right Media for $680 Million - News - MSNBC.com
11. Yahoo buys RightMedia to tackle Google News - PC Advisor
12. » Yahoo buys rest of Right Media for $680 million | Between the Lines | ZDNet.com
13. Yahoo! buys online ad exchange Right Media | Internet Marketing News and Blog | E-consultancy.com
14. Google and the Rebirth of Banner Ads - BusinessWeek Online - MSNBC.com
15. Yahoo to buy internet advertising firm Right Media
16. Microsoft's online failure - BloggingStocks
17. GOOG - Is Microsoft after Google's ad business? - BloggingStocks
18. Yahoo to snap up advertising exchange Right Media in $680m deal - ComputerworldUK - The Voice of IT Management

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