Yahoo to Buy Online Ad Firm for $680 Million

By Mike Musgrove
Washington Post Staff Writer
Tuesday, May 1, 2007

In the latest sign that small Internet advertising firms have become hot properties, Yahoo said yesterday that it plans to acquire online advertising company Right Media for about $680 million, a move to stake out its online turf against competitors such as Google.

Privately held Right Media, of New York, operates an online auction system that allows advertisers to bid on space on a Web site, the company said.

Yahoo, of Sunnyvale, Calif., acquired 20 percent of Right Media in October 2006 for $45 million.

Some technology analysts said the move is a response to Google's recent purchase of online ad firm DoubleClick for $3.1 billion after engaging in a bidding war with Microsoft and AOL.

"Clearly, this is an attempt to compete with what Google's been doing," said Jennifer Simpson, an analyst with Yankee Group. "Yahoo did grow last year, but Google has really been stepping away from the competition. . . . There will be a certain attention paid to Microsoft to see what they do next in this advertising chess game."

In some financial quarters, Google has doubled or more than doubled Yahoo's earnings, Simpson observed. With text-based ads that pop up along a Web user's search results, Google holds about a quarter of the online advertising market, according to JupiterResearch.

Yahoo, a distant second to Google in the online search market, has instead focused on larger ads that feature images. Where Google is the leader in text ads, Yahoo is considered the leader in graphical ads.

Last year, Yahoo reorganized into two divisions, with one dedicated exclusively to advertising.

Yahoo plans to be both a buyer and a seller on that advertising network.

Yahoo executives said they expect Right Media to grow 30 percent this year and 50 percent in 2008.

"This will democratize the buying and selling of ads on the Web," Terry Semel, Yahoo's chairman and chief executive, said of the acquisition.

Asked in an interview yesterday whether the acquisition of Right Media is a response to Google's purchase of DoubleClick, Semel said it "absolutely is not."

Semel disputed the notion that Yahoo has moved too slowly and lost ground to Google in some areas. "The world has changed a lot in the last year," he said. "I think we adjusted very quickly."

Semel received $39.8 million in compensation from Yahoo last year, mostly in stock options, according to a company filing with the Securities and Exchange Commission yesterday.

Yahoo also said yesterday that it has reached a deal with Comcast in which Yahoo will sell advertising on the cable provider's Web portal, Terms were not disclosed.

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