Yahoo! to Buy Right Media Ad Exchange
Yahoo! said yesterday it will spend $680 million in cash and stock to acquire the whole of Right Media, an interactive display ad exchange that lets online marketers and Web publishers come together to set a price for Internet ad delivery.
Yahoo! already owns 20% of equity in the exchange, purchased last year for $40 million as part of Right Media’s second funding round after its 2003 start-up. Yahoo! expects the deal to close in the second or third quarter of this year.
CEO Terry Semel, making the announcement in a conference call, said Yahoo! considers display advertising to be “a very vibrant marketplace.” Exchanges such as Right Media make most of their deals in remnant ad space — non-premium Web pages from small publishers or niches within larger portals, of which Yahoo! has many.
Yahoo! said it expects to move more of its own ad inventory over to Right Media and to see revenue gains from competing bids for that inventory as a result. Speaking of the small portion of ad space the company had already tested on the Right Media exchange, Yahoo! CFO Sue Decker said the company had seen price lifts of more than 50%.
“A good portion of our inventory is sold to resellers and other ad networks, and we believe that there is a meaningful price spread in the buy price from us and the sell price to the markets,” she said. “We believe we can narrow that by creating a more efficient auction by bringing our two channels together.”
Yahoo! said it will also use the exchange to sell graphical ads on the partner sites in its search ad network and on eBay pages. In response to a question about possible conflicts involved in selling Yahoo! inventory alongside other publishers’ space, Decker stressed the exchange will be run completely independently. “Right Media has managed that issue internally because they have an ad network business in addition to the exchange, and they’ve managed that extraordinarily efficiently.”
Valuation of the deal was also questioned during the conference call. Yahoo!’s 20% stake in Right Media last year suggested that the company was worth $200 million. Yesterday’s acquisition will be for more than three times that amount. But Decker said integration of Right Media’s existing tools and sales team will help Yahoo! build a more robust display ad platform.
DoubleClick, which recently agreed to be acquired by Google for $3.1 billion, announced early last month that it would launch an online ad exchange of its own, clearing payments from advertisers to space-sellers
