Although this was probably to be expected, and “foreshadowed” by the earlier $40 million investment Yahoo! made in the company, the timing of the acquisition was probably forced by a couple of factors: 1) Google’s recent acquisition of DoubleClick and 2) the pressure on CEO Terry Semel.
According to the release:
Yahoo! will acquire the remaining equity interest in Right Media for approximately $680 million. Shareholders will be paid in approximately equal parts cash and stock, and Right Media options and similar equity awards will be assumed by Yahoo!.
Right Media helps Yahoo! in a number of ways. Among them:
- Helps Yahoo with a third party network (notwithstanding the newspapers) it really hasn’t been able to successfully build on its own (Right claims “19,000 advertisers, publishers and networks trade digital media with total efficiency on the Right Media Exchange.”)
- Gives third party publishers tools and capabilities that offer them value Yahoo! couldn’t in the past and make the company a more attractive partner. This will also benefit and extend to the newspaper network. (Recall that Tribune and Gannett were going to build their network on Right Media’s white label platform. Does this further force their hand and compel them to join the “Amigos” in the wake of the McClatchy defection?)
- Helps maintain the company’s strength in display advertising by increasing the value it can offer those advertisers through an extended network. Recently Yahoo!’s hold on display ad leadership has come under pressure.
- Helps the company potentially better monetize its own “remnant” ad inventory as well as offer better rates to third parties and its newspaper partners.
Right Media is the leading “exchange” among several now emerging in the market, including AdECN and the newly announced (but not developed) DoubleClick exchange. The exchanges are making bids (so to speak) to become online clearinghouses for display ad buying that offer reach, liquidity and transparency well beyond the current ad networks.
Rhetorical question: If the exchanges all become owned by the large competitive ad networks aren’t they just really big networks then? Answering that question by implication, Right Media’s CEO Mike Walrath says that the exchange will not be swallowed up but remain “independent”:
It’s important to reiterate publicly that the acquisition will in no way afford Yahoo! any unfair advantage in the Exchange. 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.
The acquisition is both defensive and offensive by Yahoo!. Overall it’s probably smart and necessary given Yahoo!’s competitive position. The acquisition also puts even more pressure on Microsoft. But I know the wheels are turning in Redmond and the company is going to do something (alliance with Yahoo!, attempted acquisition of AOL, ValueClick, AdECN, Quigo, Adify or . . .?).
We’re witnessing a period in which the big players, all but compelled by competitive dynamics, try and build as much scale and reach as they can — while they can. The “land grab” continues.
We think supply and demand should be regulated by the marketplace, not a closed platform. Right Media provides a democratic model that empowers advertisers with all of these benefits. We think our open approach is a clear differentiator from others in the industry and will provide significant benefits to publishers and advertisers.
The phrase “closed platform” is clearly a Google reference. This is the message to the market that Yahoo! will be promoting in the weeks and months to come. Google is closed, we’re open; Google is restrictive, we’re not; Google is frightening, we’re not.
Danny Sullivan offers some additional insight into the histories of AdSense and the Yahoo! Publisher Network.