Ad Firms Right Media, AdInterax Sell To Yahoo

Yahoo on Tuesday announced a pair of strategic moves aimed at bolstering its ad operations.

Yahoo acquired rich media ad provider AdInterax, and took a 20 percent stake in automated ad online exchange Right Media as part of a $45 million venture capital financing round for the company.

The deals, announced the same day that Yahoo reported lackluster third-quarter earnings (see related OnlineMediaDaily story) are intended to streamline the ad-buying process and make Yahoo's ad inventory more accessible to marketers.

By acquiring AdInterax--which makes software for creating rich media ad types from banners to streaming video--Yahoo is banking on a future where Internet advertising looks more like TV advertising. "We're very focused on one thing," said Todd Teresi, vice president of global sales operations at Yahoo--"the growing adoption of rich media online."

Yahoo's growing video ambitions were reflected in its deal this week with CBS to offer 10 to 20 local news clips a day from 16 CBS-owned TV stations nationwide. Yahoo likely also feels a new sense of urgency about maintaining its share of video advertising in the aftermath of Google's $1.65 billion acquisition of video-sharing site YouTube last week.

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Yahoo's market share of estimated image-based advertising revenue was 30.8 percent in the third quarter, according to AdRelevance, a unit of Nielsen//NetRatings. Overall revenue from image-based ads was up 13 percent from the second quarter.

Through the AdInterax deal, Yahoo will provide the company's package of rich media software tools directly to marketers at no extra charge as part of Yahoo's display advertising offerings. The AdInterax platform will form the basis of a self-service model for advertisers and publishers in its content network. Marketers on Yahoo, however, will still be free to work with other rich media providers if they choose.

As a result of the acquisition, AdInterax employees will be relocated from the company's New York headquarters to Yahoo's headquarters in Sunnyvale, said Teresi.

By buying a minority stake in Right Media, Yahoo is further broadening its ad offerings by providing marketers with a way to buy remnant display ad inventory through an open bidding process. The Right Media Exchange, formally launched in June, allows Web sites to auction impressions to the highest bidder rather than having to rely only on ad networks or agencies as middlemen.

The exchange has about 11,000 participants--including 8,000 publishers and 3,000 advertisers--and serves some 2 billion impressions a day, according to Right Media CEO and founder Michael Walrath.

Teresi said the Right Media exchange would serve as a channel through which Yahoo could offer its "non-premium" inventory for marketers "looking for a very simple and basic run-of-network advertising." By investing directly in the New York-based company, he added that Yahoo "would be better positioned to work with and influence the evolution of the ad exchange and bring the expertise and knowledge that we have of marketers needs." In return for its investment, Yahoo will gain a seat on Right Media's board.

Walrath agreed that his company's ad exchange would complement Yahoo's existing, traditional ad network by making remnant inventory sales more efficient. "Yahoo understands really clearly, and has a similar worldview of 'Let's open the marketplace up and be more efficient for everyone and let the cards fall where they may,'" he said.

He noted that attempts in the late 1990s to launch online ad exchanges fizzled because the ad market wasn't as complex, and the need for efficiency wasn't as great as it is today.

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