Yahoo! Inc.'s (NASDAQ:YHOO) decided to shell out $680 million to buy the 80% of online advertising auction company, Right Media, that it does not already own. There is a temptation to view this a a counter to Google Inc.'s (NASDAQ:GOOG) purchase of ad serving company DoubleClick, but the deals are hardly comparable.
Google bought the better business. The ad-serving industry, in which DoubleClick is the largest player, touches almost every significant site on the internet. DoubleClick has its own ad exchange business that will compete with Right Media.
Right Media is in an unattractive niche. It acts an an auction market for online advertising inventory. But, the largest websites are unlike to sell at auction what they can market directly. This would, in most cases, leave firms like Right Media with fairly unattractive inventory. User-generated content created many of these advertising impressions, but it is still unclear what value MySpace pages have to advertising.
Yahoo! has to make some bets to improve its position against Google, AOL, and MSN, but the ad auction marketplace does not seem to be a good place to start.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
5-07-2007 @ 2:11PM
wickedeye said...
Perhaps being number one is not Yahoo is intending. We should never forget leading #2 company's, such as Hertz rental car, that created it's market base simply by being the "underdog", the ugly duckling, the Betty to Archie's Veronica.!!
Don't underestimate being number 2, if there was no competition there could be no number 1.
4-30-2007 @ 6:04PM
Joem Hughes said...
Interesting views. I honestly thought that Yahoo was trying to counter Google's
Internet advertising strategy with this move. Your post offered a whole new perspective to this event.
5-03-2007 @ 2:53PM
Pat McCarthy said...
Disclosure: I'm a Right Media employee.
I just wanted to counter Douglas and point out that a huge portion of our exchange is in fact large websites putting their inventory into the auction.
You are correct that they won't auction inventory that they can sell directly at higher prices to advertisers through their own sales team, but the majority of advertising space on the web goes unsold in this manner. It's a VERY large market, why do you think Google/Doubleclick is following Right Media into that market?