Yahoo has struck a deal designed to hit back at Google’s growing dominance of the online advertising services business, agreeing to pay $680m for the 80 per cent it does not own of Right Media, which operates an online advertising exchange.
Yahoo has been outflanked by a spate of deal-making from Google in recent months, ranging from deals to sell advertising on behalf of AOL and MySpace to the $3.1bn acquisition this month of advertising services company DoubleClick.
Occupied with fixing its core search advertising technology, Yahoo has struggled to keep abreast of Google as both have looked to turn themselves into broader advertising platforms with reach beyond their own websites, though it has recently sealed advertising alliances with Ebay and a group of US newspaper publishers.
Alongside these partnerships and its company-owned websites, the Right Media deal represents the “third leg of the stool” for Yahoo as an advertising company, said Terry Semel, chairman.
Besides helping Yahoo maximise the price it gets for its own advertising inventory, owning the exchange will make it “a partner of choice for advertisers and publishers”.
The cash and stock acquisition comes at a hefty price. It values Right Media, a four-year-old private company, at nearly four times its implied value last October, when Yahoo made its initial $45m investment. Right Media had taken in $12m of venture capital before Yahoo took its stake. Further financial details were not disclosed.
Headed by Michael Walrath, a former DoubleClick executive, Right Media opened its exchange in 2005 to let advertisers, online publishers and operators of advertising networks buy and sell online classified advertising.
Buying the exchange outright would make it possible for Yahoo to shape its technology and ensure the market developed in a way that was “aligned” with Yahoo’s needs, said Sue Decker, Yahoo’s chief financial officer.