Yahoo Acquires the Rest of Right Media in Google Catch-up Play
By Scott M. Fulton, III | Published April 30, 2007, 10:32 AM
If anyone remembers the old "Max Headroom" television series produced about twenty minutes back in the past, one of its frequent send-ups was a parody of the securities market, in which equity shares were replaced with TV advertising slots. In this semi-sci-fi world, the world's economy rested on the ratings of their countries' leading networks. When a show did well, trading in ad shares for its network rose, and everyone prospered...including those guys living in the streets warming their hands over burning oil barrels and watching sitcoms.
Fast-forward twenty minutes and reality suddenly doesn't appear all that different. This morning, Yahoo - the modern equivalent of the come-from-behind "Network 23" - purchased the outstanding 80% share of an advertising placement service called Right Media, for $680 million. Right Media's business is to present ad buyers with a real-time pool of available inventory, looking for Web sites that are hot right this minute and enabling them to purchase space and time on those sites before their needles start swinging the other way.
On the surface, the obvious reason appears to be to bring the company's capital stature back near a par with Google, which two weeks ago announced its intent to purchase long-time partner DoubleClick. But there may be some deeper meaning here, as an analysts' call later this morning may reveal: Right Media has a different business model than DoubleClick, which since its inception has been centered around traditional display advertising on a cost-per-click basis. Right Media's auction system for what's called "non-guaranteed inventory" has been hailed for giving advertisers greater transparency - meaning, they can see how well ads are performing on sites before they make the purchase.
Perhaps just as importantly, they expose the real performance of participating Web sites to prospective purchasers. This arguably decreases their reliance upon traditional ratings systems like comScore and Nielsen/NetRatings, in favor of real-time statistics provided from the servers Right Media monitors.
The result is that the business model Yahoo acquires and develops may be quite distinct from Google's, and that distinction may be necessary for Yahoo to reacquire its footing in this competitive environment. But analysts this morning are wondering, why couldn't Yahoo have accomplished the same goals with the 20% stake in Right Media the company acquired just last October? If parity with Google was possible then, why was a full merger required now? Was the DoubleClick deal that much of a catalyst?
For more: Can Yahoo + Right Media Lead to a Viable Web Business Model?
I would agree with Scott in his analysis, particularly in that the real move may not be a tit-for-tat with Google, but rather in a the deeper meaning that the Right Media purchase represents.
Right Media's auction system and advertising methodology differs greatly with that of DoubleClick. Many advertisers and customers enjoy the transparency that the Right Media model provides over its competitors.
I must add that tapping into CEO Michael Walrath's experience is also very valuable. Not only did Michael found Right Media, but he also had success at DoubleClick where he created DoubleClick Direct, the company's direct marketing product. I am aware of whether Michael would maintain his current position, but imagine that the TOI (Transfer Of Information) to Yahoo by him, would be substantial.
Marc Asturias
Technology Consultant and Writer
http://www.marcasturias.com
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