Tag: Right Media

Ad networks: What recession?

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-by Thomas Rasmussen

Akamai just got serious about online ads. It acquired ad network acerno from i-Behavior last week for $95m in cash. (See my colleague Jim Davis’ report for more on this acquisition.) This marks not just a somewhat drastic change in focus for Akamai, but is also an encouraging sign for the remaining online advertising networks. Despite the current economic meltdown, and more specifically the declining revenue and abysmal forecasts from ad giants Yahoo and Google, everybody seems to want a slice of the multibillion-dollar online advertising market.

Including the Akamai transaction, a total of 23 online advertising deals have been inked this year. That is up more than 25% from 17 deals for all of 2007, and just four in 2006. This increase in M&A activity stands in stark contrast to the overall Internet M&A picture, where the number of deals has declined more than 10%.

Moreover, despite highly publicized warnings from VCs about the decline in available venture capital and possible exits, funding has been flowing freely and rapidly to online advertising startups. Some of the many to receive funding recently include mobile ad firm AdMob, which raised $15.7m last week for a total of $35m raised to date; Turn Inc., which raised $15m recently for a total of $37m; ContextWeb, which raised $26m in July for a total of more than $50m raised; social networking ad network Lotame, which raised $13m in August in a series B round for a total of $23m raised; and Adconion Media Group, which closed a staggering $80m in a series C round in February, bringing its total funding to more than $100m.

With IPO markets closed, these startups should all be considered M&A targets. Adconion in particular stands out because of its international reach and large base of 250 million users, 50 million of whom are in the US. It would be a nice fit for one of the large media conglomerates competing for online advertising dominance. And they have shown that they are not afraid of opening the vault to do so. VC and banker sources say funding is likely to continue for the near term since there is still a lot of buyer interest. It is unlikely to suffer the same fate as the social networking funding fad, because some online advertising companies actually make money. As this segment continues to consolidate over the next year, we suspect deal flow will likely eclipse that of the past 12 months. Mobile and video advertising ventures are likely to lead the next generation of online advertising-focused startups.

Select recent online advertising deals

Announced Acquirer Target Deal value Deal closed
October 15, 2008 Technorati AdEngage Not disclosed October 15, 2008
June 18, 2008 Microsoft Navic Networks $250m (reported) Not disclosed
April 29, 2008 Cox Enterprises Adify $300m May 2008
March 11, 2008 Qualcomm Xiam Technologies $32m March 11, 2008
February 5, 2008 AOL Perfiliate Technologies $125m February 5, 2008
November 7, 2007 AOL Quigo Technologies $346m December 20, 2007
September 4, 2007 Yahoo BlueLithium $300m October 15, 2007
May 18, 2007 Microsoft aQuantive $6.37bn August 13, 2007
May 15, 2007 AOL Third Screen Media $105m May 15, 2007
April 13, 2007 Google DoubleClick $3.1bn March 11, 2008
April 30, 2007 Yahoo Right Media $680m July 12, 2007

Source: The 451 M&A KnowledgeBase

Will Yahoo shareholders be Amp’ed?

Brenon Daly

Now that Yahoo has passed on Microsoft’s bid, it’s up to Jerry Yang to show the company’s testy shareholders that soldiering on makes more sense than selling out. That’s going to be a tough job. A handful of shareholders have already sued the Internet company over its decision not to talk with Microsoft, and the disenchantment is likely to spread if the stock returns to the level it was before the unsolicited bid came in. (A quick fact: From the time Yang retook control of Yahoo last June through the day before Microsoft unveiled its bid, Yahoo stock lost nearly one-third of its value on his watch.)

So how is Yahoo going to get its shareholders back above water? One key to the plan is the ‘buy and build’ initiative it has started with AMP. Yahoo’s new online advertising management platform is built on a pair of deals that cost the company nearly $1bn in 2007. A year ago, Yahoo spent $680m to pick up online ad exchange network Right Media Inc, and then followed that up last September with a $300m play for behavior-based marketing vendor BlueLithium.

AMP is slated to come out in the third quarter of this year, although a few publishers are currently test-driving it. The stakes for Yahoo are huge. By its own assessment, the US online ad market will hit $50bn in four years. Securing a chunk of that ad spending will go some distance in silencing shareholder grousing about Yang & Co’s decision to stiff-arm Microsoft. Of course, that’s only if AMP delivers and doesn’t become another Panama-style disappointment at Yahoo. If that turns out to be the case, Yang would be lucky to find a buyer for his company, even at a discount. 

Yahoo’s recent display ad networking deals

Announced Target Deal value
Sept. 4, 2007 BlueLithium $300m
April 30, 2007 Right Media $680m

Source: The 451 M&A KnowledgeBase