Cox Banks on Online Ad Synergy with Adify Buy

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. Adify has been a prominent player in the rapidly-growing branded publisher network sector. 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.

For Cox, the acquisition is about getting a bigger toehold in the online ad industry. “The key was finding a way to build value in the online advertising space,” said John Dyer, EVP of finance at Cox Enterprises.

“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. Cox-owned Travel Media, Inc. (TMI), which runs Travel Channel, was viewed as the most appropriate subsidiary to purchase Adify.

“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. 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.”

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. Fradin will report to Dyer. Completion of the transaction is expected in May.

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. 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.”

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. 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.

Ad networks including Burst Media and Collective Media offer similar ad management services to small publishers and vertical networks, and DoubleClick has signaled plans to offer its DART for Publishers clients the ability to create their own vertical ad networks. Open source tech firm OpenX also has a Web-based system for ad management. Meanwhile, AOL’s Advertising.com and Google have also gotten into the small publisher ad management game recently.

The Adify buy could inspire similar acquisition activity. “There could be several competitors that are eyed with interest,” said Riley.

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