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Apr-30-2008Cox Enterprises to Acquire Adify, an Ad Tech Firm(topic overview)
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After it becomes part of Atlanta-based Cox, it will operate as a stand-alone company led by Russ Fradin, president and co-founder of Adify. Its headquarters will remain in San Bruno, with sales offices in New York, Alexandria, Va., London, Berlin and Singapore. "Adify's commitment to customer service and innovation in powering vertical advertising networks for its customers has been key to its success and is a great match for Cox, a company that has served the advertising community for over a hundred years through its various media platforms," said John Dyer, executive vice president of finance at Cox Enterprises. [1] The Atlanta Journal-Constitution is owned by Cox Enterprises. "This gives us the opportunity to participate in the growth of online advertising," Dyer said. "We think this will work." Adify, based in San Bruno, Calif., allows media companies to extend their advertising sales beyond their own Web sites, said Adify Chief Executive Russ Fradin. It identifies prospective Web sites with common subject matter -- for instance, parenting or travel -- and offers them as a package to advertisers wanting to reach their readers without having to buy ads from each site individually. "If you're a media company, you need to deliver advertising to a larger audience," he said.[2]
Adify already runs several ad networks, including a lifestyles-focused one for Martha Stewart Living Omnimedia Inc. and a network of hundreds of independent financial blogs assembled by the online unit of Forbes Inc. Cox is exploring its own specialty ad networks around such Web properties as cable TV's Travel Channel, the AutoTrader.com classifieds site and the Kudzu local search portal. Russ Fradin, who will continue to run Adify, said Cox was initially in talks with Adify to launch such networks as a regular customer. A year of discussions led to Cox deciding to buy the startup outright, he said.[3]
Cox spoke to a dozen of Adify's clients before making the final offer. Adify has helped build 108 vertical ad networks for media companies such as Forbes, Martha Stewart Living Omnimedia (NYSE: MSO), NBC Universal (NYSE: GE), Reuters (NSDQ: RTRSY), Time Warner (NYSE: TWX), The Washington Post Co. (NYSE: WPO), The Guardian and others. "One of the benefits of being a privately held, big company with tremendous assets like Cox, is that you can take a strategic and studied look at an opportunity," Kaufman said "For well over a year, they have been studying the online ad marketplace and assessing how they want to engage with their partners. Frankly, our customers, when we've told them about Cox, have said that it's a terrific home for Adify, because we partner with them already."[4] Adify is focused on vertical online advertising. The company's technology and services allow major media companies, venture-backed businesses and entrepreneurs to build and operate targeted ad networks that support their advertisers' goals.[5] More than 100 ad networks operate on Adify's technology platform, according to the statement. "Adify's commitment to customer service and innovation in powering vertical advertising networks for its customers has been key to its success and is a great match for Cox," said John Dyer, executive vice president of finance at Cox Enterprises, in the statement.[6] As we reported earlier, vertical ad network builder Adify is being acquired by Cox Enterprises, through its subsidiary Cox TMI. Adify will operate as a wholly owned unit of Atlanta-based Cox and will continue to be headed by Russ Fradin, president and co-founder of Adify.[4]
CEO Russell Fradin and COO/CFO did the deal themselves. Adify's 80 employees will continue to operate as an independent company and maintain existing clients such as Martha Stewart Living Ominimedia and Forbes, Inc. Cox is already working on a joint initiative to develop an ad network for its Cox Communications cable division.[7]
As the online ad network space continues to expand and morph, Adify has become a major player in the rapidly growing vertical network sector. Near the time of its August 2006 launch, the firm signed deals with niche publishers of Web sites for canine enthusiasts and U.S. war veterans.[8] Fradin said Adify would continue operating as an independent company, with Cox competitors treated as well as Cox-owned Web sites. He said early investors in Adify, which include General Electric Co.' s NBC Universal and Time Warner Inc.' s investment arm, will cash out and have no direct control after the deal closes, which is expected to happen in mid-May.[3]
Adify Corp., a 3-year-old company that knits together many Web sites into large audiences that are attractive to advertisers, is being bought by Atlanta-based Cox Enterprises Inc. for $300 million.[2] Media co. NEW YORK (AP) — Media conglomerate Cox Enterprises Inc., betting its future on Internet advertising as newspaper and television audiences shrink, plans to spend $300 million to buy a startup that helps Web sites pool their ad space.[3]
Is the future of advertising networks in the hands of those that decide to build their own? Cox Enterprises must think so as it has shelled out a rumored $300+ million for Adify, a self-service ad network that enables publishers to build their own ad network.[7] Less than two years since its launch, vertical ad network platform company Adify has been snapped up for $300 million by Cox TMI, a division of Cox Enterprises.[8]
Advertising network Adify is being acquired by Cox Enterprises for $300 million, the Associated Press is reporting.[9]
Set to be announced today (April 29th), the deal is said to be worth $300 million and is part of Cox Enterprises' move into the web advertising market.[10]
There are several units under the Cox umbrella, including Cox Communications (cable television distribution, advertising solutions and Travel Channel); Cox Newspapers (includes national direct mail advertising); Cox Television (broadcast and television sales rep firms); Cox Radio, Inc. ( broadcast radio stations and interactive web sites); Manheim (vehicle auctions, repair and certification services and online tech products) and Cox Auto Trader (publisher of car magazines and the AutoTrader.com site). Even with all those properties that it will now have some relation to, Adify plans to remain tightly focused on the Web. It's unlikely that Cox intends to use it as part of the Project Canoe cable ad targeting initiative backed by Comcast (NSDQ: CMCSA), she said. "Cable advertising is not our area, though I wouldn't rule anything out in the future," she said[4] According to reports in the Associated Press (AP), the agreement is an all-cash transaction. A self-service advertising network intended for firms interested in developing their own network, Adify enables publishers to negotiate ad rates, as well as to reject advertisers. It helps media firms to form networks of websites based on a variety of topics, including travel and parenting, which allow marketers to reach readers on a large number of like-minded sites through a single purchase of ad space. In return for its services, Adify gets around 20 per cent of the revenue generated through the transactions. Reportedly, its clients include such media organisations as the Guardian, NBC WeatherPlus and Forbes.com.[10] Adify also recently signed a deal to power a new network from blog platform maker Six Apart. More and more brand name publishers have introduced vertical networks comprised of small non-owned sites, in order to collect on the popularity of blogs and social media, and to extend reach beyond their own properties.[8]
Adify is one of many ad networks that have emerged over the past year. It got its start in the niche vertical network world by introducing a network of blog sites associated with Veterans of Foreign Wars of the United States.[9]
Adify provides back-end ad management for 108 vertical networks, some run by larger media companies including NBC Universal iVillage, Martha Stewart, Warner Bros., and Forbes.[8] Adify helps media companies form networks of Web sites around parenting, travel and other topics, allowing marketers to reach readers on dozens or hundreds of like-minded sites through a single buy.[3] We've prided ourselves in the course of history in being early investors." With Adify, Cox gets a technology platform that can help Web sites more successfully sell higher-priced ads targeted to specific audiences, such as parents or travel enthusiasts, keeping brand-name advertisers from fleeing to larger Internet companies like Google Inc. and Yahoo Inc.[3]
"We really like the business model that Adify has developed," said Dyer, who named three likely pair-ups for Adify and Cox properties in the near future. "Inside of Cox, there are a couple opportunities for the creations of vertical ad networks," he continued, naming AutoTrader.com and Travel Channel as possibilities. Adify also could have synergies with Cox's local business listings and review service Kudzu, he said.[8] Interesting development for Six Apart, we think. A week ago, they were dealing with Adify, one of a number of small blog ad services providers. Now when Chris Alden and company try to reach Adify's Russ Fradin, they will be talking with Cox Enterprises' latest acquisition.[11] Cox Enterprises acquired advertising management tool maker Adify, which recently partnered with Six Apart to provide that company's ad platform with its back-end services.[11]
April 29, 2008 (Computerworld) Cox Enterprises Inc. today announced that its subsidiary, Cox TMI Inc., will acquire vertical online advertising company Adify Corp.[6] Media company Cox Enterprises has purchased online ad start-up Adify, it has been revealed.[10]
Adify began as a startup idea by a trio of people sitting around a cabana in Silicon Valley, but it represents "the next step in advertising," said John Dyer, Cox Enterprises' executive vice president of finance.[2] Speaking to the AP, John Dyer, executive vice president for finance at Cox Enterprises, said: "We're absolutely convinced at Cox that online revenue is continuing to grow.[10]
"The key was finding a way to build value in the online advertising space," said John Dyer, EVP of finance at Cox Enterprises.[8]
"As Adify began raising our third round of financing to fund our expansion, Cox Enterprises expressed interest in acquiring us," Fradin said on the Adify blog.[11] "Although Adify was not seeking an acquirer, Cox'''s history, resources, and people demonstrated that it would be a very compatible business partner and the perfect home for our company." Fradin also said Adify will operate independently within Cox; he also claimed that the founders would not pack their bags and leave Adify and its early customers behind, as happens with other companies scoring a big payday. That payday arrived as an all-cash deal. PaidContent noted how the negotiations were especially lucrative, as Adify's Fradin and other officers negotiated the price without banking representation.[11] Adify co-founder and President Russ Fradin will stay on to lead the firm, which will operate as a stand-alone company based in San Bruno, California.[8] Neither company could be reached for comment. Adify will continue to operate as a stand-alone company and will continue to be headed by its president and co-founder Russ Fradin, the company said in a statement.[6]
Cox said that Adify will remain headquartered San Bruno, Calif. and continue to be led by president and co-founder Russ Fradin.[12]
The three-year-old Adify will remain in San Bruno, CA. with sales offices in New York, Alexandria, Va., London, Berlin and Singapore. More details in this release issued by Cox. In a post on Adify's official blog, the company said that Cox approached them as Adify began raising a third round of funding designed to support its expansion plans.[4]
Fradin, one of Adify's co-founders, likened the company's business model to one created more than two decades ago when TV networks faced competition from cable channels. As cable fragmented their traditional audience, said Fradin, the networks responded by acquiring specialty networks to keep advertisers from fleeing. The principle also is comparable for national magazines, which offer sales packages to regional advertisers, he said.[2] Then Cox offered it more than 10 times that amount to become part of a diversified company that owns the Journal-Constitution as well as other newspapers, television and radio stations, cable TV and high-speed Internet systems, and auto auctions. Joining Cox, said Fradin, allows Adity to pay its investors. "They're getting a good return on their money." It also means Adify doesn't have to worry about raising more capital, he said.[2] The company is buying Adify at a time of shrinking newspaper and television advertising revenues.[2]
While financial terms of the deal were not disclosed, PaidContent pegged the price tag at around $300 million, and reports that Adify saw revenues of $7 million last year and is expected to pull in $35 million in 2008.[12] According to paidContent, Adify had been on the scout for investment funding but instead found a buy-out deal even more tempting. Adify made about $7 million in revenues in 2007, and is on track to do around $35 million this year.[7]
I spoke with Joelle Gropper Kaufman, Adify's VP of marketing, who told me that the $300 million-plus deal was done in cash and includes a set of incentives, based on performance results and growth, designed to keep the current management team intact.[4]
That is a pretty sweet deal for Adify hopefully it ends up being a great deal for Cox too.[7] The all-cash deal with Adify Corp., to be announced Tuesday, represents the latest evolution for a media company that began more than a century ago with one newspaper in Dayton, Ohio.[3]
According to Russell Fradin, chief executive officer of Adify, the start-up will continue to operate as an independent company.[10] Fradin said the two companies will continue to invest in products and services to attract new customers. Both companies expect the deal to be completed by the end of May.[6]
The ISP and cable TV provider might also use the ad management technology to foster or expand partnerships with media companies. "It wouldn't be direct; it would be based on their internal partnerships," she said, noting Cox "has access to ad sales negotiations." [8] Kaufman said the two companies have been involved in talks for the past several months. Cox began actively looking for a company in the online space more than a year ago: "They looked at our competitors, they looked at technology companies and eventually, they looked at us."[4]
According to paidContent.org, Cox is paying $300 million for the San Bruno, Calif. -based company.[6] Media giant Cox Enterprises had more than $15 billion in revenue in 2007 and has more than 83,000 employees.[1]
The company has about 80 employees. The customer list includes entrepreneurs and established media outlets, such as Forbes, The Guardian, HotChalk, Houseblogs, Martha Stewart, NBC Universal, Reuters, Time Warner and Washington Post Co.[2]
Clients of Adify's self-service online ad network include Forbes.com, Martha Stewart Living Omnimedia and Guardian.[12] Then the firm began attracting bigger media clients, helping to foster growth of the now popular branded publisher network sector. "What Adify brings to the table is relationships with traditional media companies," said Riley, adding, "They're used to piecing together inventory for more traditional media companies."[8] Adify has been a prominent player in the rapidly-growing branded publisher network sector.[8]
The company went from powering niche content networks for little-known blogs and small site publishers to backing vertical networks for the likes of Warner Bros. and Forbes.[8]
Marketers wishing to reach a targeted audience may find a particular media Web site lacking enough ad space to sell.[3] "Adify is a way to aggregate properties and sell ads across properties," said JupiterResearch Senior Analyst Emily Riley, suggesting Cox will create internal networks using Adify.[8] Adify develops custom online ad platforms for customers, including Forbes.com and the Guardian.[6]
SOURCES
1. Adify joins Cox Enterprises family - Atlanta Business Chronicle:
2. Cox Enterprises to buy online ad company | ajc.com
3. The Associated Press: Media co. Cox eyes online ad growth, buys startup for $300M
4. Interview: Joelle Kaufman, VP, Marketing, Adify; Cox Enterprises Offers Incentives To Retain Execs - washingtonpost.com
5. Article - TechJournal South - The Southeast's Source for Technology Business News
6. Cox Enterprises acquires online ad company Adify
7. Cox Enterprises Sees Future in Self-Service Ad Network, Acquires Adify
8. Cox Banks on Online Ad Synergy with Adify Buy - ClickZ
9. Report: Adify Sold to Cox for $300M [ClickZ Internet Marketing Solutions for Marketers]
10. Cox Enterprises buys online ad network Adify
11. Adify Tapped By Cox In $300 Million Deal | WebProNews
12. Cox Acquires Adify Online Ad Network for $300 Million | Digital Media Wire
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