Yahoo Buys BlueLithium, Dreaming of Network Dominance

  |  September 5, 2007   |  Comments

The $300 million acquisition of the behavioral network positions Yahoo as a more direct competitor of AOL, owner of Advertising.com and behavioral firm Tacoda.

It's official: Yahoo is becoming a full-fledged ad network giant. The firm has agreed to purchase performance-based behavioral targeting network BlueLithium for about $300 million in cash. The buy expands Yahoo's network horizons, tacking on complementary behavioral technology and campaign and inventory management technology, as well as extending the value of data gleaned for ad targeting purposes.

The agreement comes shortly after the company harnessed an efficient media exchange platform via its acquisition of Right Media and floated some grand network ambitions by forming ad serving relationships with eBay, Comcast, and potentially several newspaper publisher partners. It's all part of an ongoing mission to better compete with the likes of Google and -- perhaps more directly -- AOL, which not only owns the largest online ad network in Advertising.com, but recently acquired behavioral ad network and tech firm Tacoda for $275 million.

An end result of the company's network expansion, for instance, could be Yahoo combining its own registration data with data gleaned on eBay's site and BlueLithium publisher sites to serve an ad on SfGate.com, owned by Yahoo's newspaper partner, Hearst.

"BlueLithium's targeting capabilities will certainly be extended to the Yahoo network," said Todd Teresi, SVP of Yahoo Publisher Network, who will eventually head up BlueLithium's media buying, optimization and publisher management operations once integration is complete. "The capabilities they bring off-network will enable them to leverage the insights we bring about consumers across the Web," he added.

"Yahoo is limited by the behaviors they can track on their own property," said JupiterResearch Analyst Emily Riley, who said technology needs were a part of Yahoo's decision to buy BlueLithium. "[Yahoo] doesn't have the infrastructure set up to do automatic optimization and payments for publishers the way other ad networks do," she continued.

Although BlueLithium offers CPM-based pricing, Yahoo believes the acquisition will help it better provide performance-based display advertising sold on a cost-per-action basis. Indeed, the network buy could be a way to boost Yahoo's recently weak display ad revenues. BlueLithium targets ads using behavioral, demographic and geographic information, as well as by day-part.

According to Teresi, Yahoo wants BlueLithium to "breathe its expertise" in direct response sales into Yahoo's sales force, which is better versed in selling contextual ads to brand advertisers. "Our sales team has been transitioning... to learn more how to sell off-network and create opportunities based on audiences" as opposed to selling page placements, he said.

Yahoo is "considering merging and retraining sales teams" and "centralizing sales efforts" across all its acquired properties, said JupiterResearch's Riley.

Additionally, the firm will be an active participant in the Right Media Exchange.

ComScore ranked BlueLithium sixth among the steadily-growing field of online ad networks in June, comprising 116.6 million unique visitors and reaching 66 percent of the total Web audience. AOL's Advertising.com came in at number one with 155.2 million uniques and 87 percent reach, while Yahoo's own network ranked in the second spot, reaching 73 percent of the total Internet population, or 129.2 million unique visitors in June. Also that month, Google came in seventh place, garnering 113.8 million unique visitors and hitting 64 percent of the Web.

BlueLithium will become a wholly owned Yahoo subsidiary; the network counts about 20 people in its sales team, and about 100 employees total. Headquartered in San Jose, BlueLithium has more than ten offices in Boston, Chicago, London, New York, Paris, and Belarus, and elsewhere.

Yahoo is also "hiring very broadly across our channels," including sales, Teresi said.

Yahoo will incorporate BlueLithium's sales, operations and engineering operations into its ever-morphing corporate structure. BlueLithium CEO Gurbaksh Chahal will remain in his current position "for an interim period through the integration," according to a Yahoo statement.

Following standard regulatory inspection and approval, Yahoo expects the deal to finalize in Q4 of this year.

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ABOUT THE AUTHOR

Kate Kaye

Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.

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