Yahoo Inc added another weapon in its high-stakes duel with its richer Internet rival Google Inc on Monday by snapping up online advertising exchange Right Media Inc for US$680 million.
Although the cash-and-stock price is well below the US$3.1 billion that Google recently agreed to pay for online ad distributor DoubleClick Inc, Right Media did not come cheaply for Sunnyvale-based Yahoo.
Last October, Right Media was valued at US$200 million based on the US$40 million that Yahoo paid to acquire a 20 percent stake in the privately held company at that time.
PHOTO: AFP
Yahoo is now paying more than three times Right Media's valuation just six months ago to gain full ownership of an exchange designed to make it easier for Web publishers to show what they have to sell to online advertisers.
The notion of a more transparent market is becoming increasingly attractive to both publishers and advertisers, especially since it has become apparent billions of dollars in spending is bound to migrate from other media to the Internet during the next decade.
With the shift, major advertisers are expected to increasingly emphasize more visual ads instead of the short text-based messages that have driven the success of search-driven networks controlled by Google and Yahoo.
Right Media and DoubleClick specialize in these display, or so-called "graphical," ads.
After focusing primarily on finding the best place to show advertisers' messages, Doubleclick is now trying to develop an exchange similar to the one Right Media has been building up for the past two years.
New York-based Right Media still is not profitable, but is expected to generate about US$70 million in revenue this year, doubling from last year, Yahoo chief financial officer Susan Decker told analysts in a Monday conference call.
With roots in the dotcom boom of the 1990s, DoubleClick is much larger with annual revenue of about US$350 million.
Yahoo believes it can help Right Media quickly expand its exchange business after the acquisition closes in the second or third quarter.
About 19,000 advertisers, publishers and networks buy and sell advertising on its auction-based exchange.
Yahoo shares dipped US$0.30, or 1.1 percent, to close at US$28.04 on the NASDAQ on Monday. Yahoo's stock price has fallen by 13 percent since it announced disappointing first-quarter earnings two weeks ago.
The results served as another reminder that Google has been widening its lead over Yahoo in online search -- by far the Internet's biggest moneymaking machine so far.
During the first three months of the year, Google generated US$3.6 billion in ad revenue, more than doubling Yahoo's US$1.5 billion in the same period.
In another deal that could help accelerate its growth, Yahoo on Monday also announced it would deliver online display and video ads to Comcast Corp's Web site, which serves up more than 2 billion pages per month.
Financial terms of that partnership weren't disclosed.
Now that both Google and Yahoo have bought advertising intermediaries to help expand their clout on the Internet, Microsoft Corp is widely expected to make a similar deal as it tries to become a more formidable force online force.
The list of possible Microsoft targets include aQuantive Inc, ValueClick Inc and 24/7 RealMedia Inc.
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