Looking Beyond The Portal, Yahoo Acquires BlueLithium
Yahoo's effort to build the leading online advertising platform is bolstered by the $300 million cash deal for the "behavioral targeting" ad network.
Continuing the online ad industry's consolidation, Yahoo on Tuesday said that it planned to acquire online ad network BlueLithium for $300 million in cash.
In a statement, Yahoo CEO Jerry Yang said BlueLithium's products, technology, and people would help his company in its effort to build the leading online advertising platform.
"This acquisition will extend our ability to deliver powerful data analytics, advanced targeting, and innovative media-buying strategies to our customers, who are increasingly looking for these insights," Yang said. "By leveraging BlueLithium's complementary expertise and tools, we will be able to better address the needs of our performance-based display advertisers and enhance the value of our publishers' inventory."
"This was a move that Yahoo had to make to stay competitive with Google and MSN," said Martin Laetsch, senior director of search strategy at SEMDirector, a service provider for search marketing automation, via e-mail. "Since both companies have purchased ad networks recently, Yahoo has been limited to its own properties and a fairly small publisher network, plus the Right Media exchange. This acquisition will enable Yahoo to maintain its role as a key player in the online advertising space."
Of the five acquisitions Yahoo has announced or made this year, three have been online ad companies. In April, Yahoo acquired for $680 million the remaining 80% of Internet ad firm Right Media that it didn't already own. In August, Yahoo acquired Actionality, a German mobile ad company for an undisclosed sum. BlueLithium marks the third.
Competitor Google has announced or made 15 acquisitions so far this year. Two of them -- Adscape and DoubleClick -- have been ad-related. Microsoft has announced or made 12 acquisitions, three of which -- AdEcn, aQuantive, and ScreenTonic -- have to do with online advertising.
Yahoo appears to have gotten a better deal for BlueLithium than Google did for DoubleClick. Yahoo is paying $300 million for a company that is projected to bring in about $100 million in revenue in 2007. Google is paying $3.1 billion for DoubleClick, which made about $300 million last year.
"This is a great deal for Yahoo," said Stan Sandberg, a principal at investment bank Gridley & Company. "It's a natural next step after the Right Media deal. They're consolidating their leadership position in the display ad part of the ad industry."
Internet metrics firm comScore says that BlueLithium is the fifth largest ad network in the U.S. and second largest in the U.K. The company uses data from the 145 million monthly online visitors around the globe who are exposed to its ads to help advertisers reach consumers with appropriate interests. It specializes in what's known as behavioral targeting.
"BlueLithium is known for providing powerful data analytics to help customers get the most out of their campaigns as well as impressive behavioral targeting capabilities," said Todd Teresi, VP of global sales operations at Yahoo, in a blog post. "They provide the dashboards and insights our performance customers have been asking for -- capabilities that have been a bit of an Achilles heel for us."
Jeremy Liew, a partner at venture capital firm Lightspeed Venture Partners, characterized the deal as one of necessity. "The way I think about it is all the portals, if you look at their market share of total page views, it's been shrinking," he said. "The implication is if you want to maintain your page views when your inventory is shrinking, you need to own an ad network."
Liew used to work at AOL, first as SVP of corporate development and chief of staff to the CEO, and then as general manager of Netscape. He said AOL was the first to experience the diminishing importance of portals. "Our ad inventory at that time was heavily tied to the subscriber base, which was shrinking," he said. "AOL was the first to buy an ad network because it was the first to realize that. ... The other portals are coming to that realization."
To survive shrinkage, portals need to be able to sell ads on other sites. Liew attributes the online audience's move away from portals to search technology, which lets people find and visit so-called "long tail" or niche sites that they wouldn't otherwise be aware of. He also said that social networking sites like Facebook and MySpace have hurt portals.
Sandberg said he expects to see the online ad industry continue its consolidation. "IAC and News Corp and even The New York Times are going to start evaluating their ad technology," he said. "Those guys are likely to be buyers over the next 6 to 9 months."
Next on the auction block? Sandberg thinks it might be Revenue Science, another behavioral targeted advertising firm. But it could be any of the online ad companies out there. "All these guys are getting phone calls," he said.
[Interop ITX 2017] State Of DevOps ReportThe DevOps movement brings application development and infrastructure operations together to increase efficiency and deploy applications more quickly. But embracing DevOps means making significant cultural, organizational, and technological changes. This research report will examine how and why IT organizations are adopting DevOps methodologies, the effects on their staff and processes, and the tools they are utilizing for the best results.
Digital Transformation Myths & TruthsTransformation is on every IT organization's to-do list, but effectively transforming IT means a major shift in technology as well as business models and culture. In this IT Trend Report, we examine some of the misconceptions of digital transformation and look at steps you can take to succeed technically and culturally.