Right Media Buy Pits Yahoo Against Google’s DoubleClick Exchange

Yahoo will acquire online ad exchange Right Media, expanding the escalating war between Yahoo and Google into a new theater. The buy gives Yahoo a marketplace connecting publishers and advertisers, and pits the Right Media Exchange squarely against the new exchange from DoubleClick, which was recently snapped up by Google in a deal that has given the dry business of online ad and inventory management newfound cachet.

Yahoo will pay approximately $680 million, split evenly between Yahoo stock and cash. The deal is expected to close in Q2 or in Q3 of this year. In October 2006, Yahoo purchased a 20 percent stake in Right Media and has offered a small amount of its inventory through Right Media’s RMX Direct exchange since then. Yahoo anticipates Right Media to generate roughly $70 million this year.

Yahoo aims to improve monetization of its non-premium or remnant inventory through the exchange. The deal “will help us realize the most value for Yahoo’s own inventory as well as that of our partners,” said Yahoo chairman and CEO Terry Semel during a press conference this morning.

Yahoo stressed it will run the exchange as an independent operation as part of its advertising and publisher group. The Web portal also will employ the exchange to sell display ads across its own site as well as affiliate sites in its search ad network and the growing consortium of newspaper publisher sites the firm has aligned with. In addition, Yahoo will employ the exchange for the display ads it provides on Ebay.

Publishers will be able to bundle their own inventory with Yahoo’s and other inventory in the exchange, the company said. The anticipated result is more transparency than typically opaque ad networks, increased liquidity in online ad inventory, and higher ad rates for remnant inventory, which usually garners small payments.

Inventory Yahoo has sold through the exchange has resulted in “price lifts of over 50 percent,” said Sue Decker, Yahoo’s EVP and head of its advertising and publisher group.

Right Media’s system awards media to advertisers agreeing to pay the highest cost-per-impression to publishers. The RMX Direct exchange includes inventory from about 1,000 publisher sites, allowing them to sell CPM- and cost-per-action-based ads. The company provides full reporting by advertiser, ad size and other measures. Right Media charges networks a monthly fee to access its ad inventory, in addition to taking a cut of the revenue from ads run through RMX Direct.

Google-owned DoubleClick recently announced its Advertising Exchange venture, an effort to compete with the likes of Right Media and exchange firm AdECN. Some believe DoubleClick, and now Yahoo, could alienate publishers and networks they must rely upon to allocate inventory to their exchanges. DoubleClick, for instance, could be taking publisher inventory directly from the networks it will want in its exchange. And, now that it’s aligned with Yahoo, a longtime rival of most online publishers, Right Media could deter the very publishers it needs to fill its exchange from participating.

Yahoo stressed the fact it will run the exchange as an independent operation. “Also,” said Yahoo SVP Display Marketplace Todd Teresi, “in a show of our commitment to building up and creating a vibrant marketplace…we’re actually inviting other publishers to sell our inventory.” Sales staff at Yahoo’s consortium of newspaper site partners already bundle Yahoo inventory with their own to broaden ad offerings and expand reach.

To target ads through the exchange, Yahoo said it will eventually use anonymous behavioral data gleaned from users on its site in addition to anonymous data from exchange publishers that choose to provide it. For instance, explained Teresi, an advertiser may be able to target males on technology sites in the exchange in the future. Data used in the exchange are owned and controlled by publishers, not Right Media, according to Yahoo.

Some analysts believe Yahoo has the upper hand in the exchange business now compared to Google’s DoubleClick since Right Media is more entrenched in this nascent market. Forrester Research Senior Analyst Shar VanBoskirk, however, isn’t so sure. “Actually, I think that DoubleClick’s brand is stronger in the ad exchange space than Right Media,” she said, noting even though DoubleClick only recently began testing its exchange, several of its clients have always thought the firm had such an offering. VanBoskirk acted as a consultant to DoubleClick in helping position its new exchange in the marketplace.

She predicts DoubleClick is poised to swoop in and overtake Right Media, despite its new high-profile parent. The online ad industry will “hinge on the exchange model in the next few years,” VanBoskirk told ClickZ News for a previous story.

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