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Monday, April 30, 2007

Yahoo & Right Media : Execution Is The Key

The web advertising business has become too hot suddenly. Hot on the heels of Google Doubleclick deal Yahoo today announced acquisition of Rightmedia . While commenting on the Google-Doubleclick deal,I wrote that Google’s aggression is not only going to help its cause but very likely to drive Yahoo and Microsoft to come together. Its interesting to see what all a shrewd market leader can do – expand the market, consolidate its position and define what competition needs to do!! Well Yahoo has responded swiftly – they have acquired the remaining stake in Rightmedia,which runs an ad exchange, quite different from an ad network
Lets look at this : Historically, Yahoo has been the leading players in the banner display ads segment. Till recently, Yahoo had the highest traffic on the net and it used to charge advertisers to let their brand reach out to users and in the process collect money for this. Yahoo’s revenue stream used to be based on charging cost per thousand/million traffic for ads and this is not linked to clicks – much like a static TV audience coverage . RightMedia could help Yahoo go beyond, it can help bring together an ad exchange for display ads with something like an auction style pricing model. The key difference that is brought out here centers on the fact that Right Media owns an ad exchange, quite different from an ad network. While Ad networks typically aggregate ad inventory from publishers and resells it to advertisers ad exchanges are more like a marketplace where publishers and advertisers can come together – do a mix and match and finalise ads the way they want to be run etc. In this revised model, Ad networks become the consumers of the ad exchanges –albeit a very big class of customers by themselves. This is different from Google’s forte : text based ads that appeal to a broad based set of advertisers – typically small business.
On paper, this is a smart position for Yahoo to take – the market exchange brings together both the publisher & consumer as against just being a powerful context synthesizer with wider delivery reach like Google. With this RightMedia edge, Yahoo’s ability to build more and more traffic and rope in high quality advertisers would be very integral to its renewed success – execution will decide how smart this move is and whether the acquisition pricing is right. Yahoo publishing network could never compete effectively with Google’s adsense despite some occasional good reviews in its favour. Infrastructure like Right Media/DoubleClick would have to integrate well with the display engines like that of Yahoo/Google to produce lasting success. Terry Semel points out that supply and demand should be regulated by the marketplace, not a closed platform. Right Media provides a democratic model that empowers advertisers with all of these benefits. Fact is that with this acquisition, Yahoo gets a small chance to get one better than Google in the ad business – but one will have to see how fast and effective its execution would be to capitalize on this. Execution will make the difference.

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