Yahoo Gets Right Stuff to Target Google

Yahoo said Monday it is buying the remaining 80 percent interest in online advertising exchange Right Media that it does not already own for approximately US$680 million in a move aimed at boosting the reach of Yahoo’s advertising to social networking sites.

In October, the search giant purchased a 20 percent stake in the privately held, New York-based ad exchange firm. More than 19,000 advertisers, publishers and networks buy and sell advertising on Right Media’s auction-based exchange.

Media Exchange

Right Media runs an exchange in which advertisers and publishers buy and sell online ad placements in real time through an auction system.

Yahoo is banking on grabbing the lead over Google in the niche ad market, where sellers gain greater access to a larger pool of advertisers.

Unlike an ad network, an ad exchange is a marketplace where publishers and advertisers can execute advertising transactions. Ad networks aggregate inventory from publishers and resell it to advertisers.

“The acquisition of Right Media will further Yahoo’s goal to create the industry’s most open, accessible and vibrant advertising marketplace,” said Yahoo chairman and chief executive Terry Semel.

The Evolving Market

Although Yahoo is the market leader in display advertising used by large, brand-name marketers, the Right Media acquisition signals it is seeking to grow its presence in the micro-targeted audience such as individual social network profiles, Yahoo said.

Yahoo still remains a distant second behind Google in terms of online search market share and advertising revenue. Google’s acquisition of premium ad network DoubleClick for $3.1 billion last week may have put Yahoo at even more distance.

Playing Catch-Up?

Although on the surface the move looks like a defensive response to Google’s DoubleClick acquisition, it isn’t likely because the expansion has been in the works for the past year, said Forrester Research Vice President and Principal Analyst Charlene Li.

“I think it’s actually an offensive strategy for Yahoo to build on its dominance in the graphical ad marketplace,” Li told the E-Commerce Times. “Yahoo is putting a stake in the ground that the future for online display advertising lays in efficient, easy-to-use marketplaces, and it wants to be the trusted intermediary for that future.”

Yahoo’s move should make it difficult for Google to start its own ad exchange, which DoubleClick announced earlier this month. Right Media has been operating an ad exchange for over two years, giving it a management and technical experience edge over its rival, Li said.