Yahoo makes its move, snags Right Media, an ad-exchange

A few weeks after Google made an astonishing $3.1 billion bid for DoubleClick, The New York Times is reporting that Yahoo will acquire the remaining 80% of New York-based Right Media, an online ad-exchange company, backed by Redpoint Ventures, for about $680 million. Yahoo had previously bought 20% of Right Media.

Yahoo’s decision to snap up Right Media is all about the ad-exchanges, which have been gaining some traction lately. “What we look forward to do as an owner is put more inventory into that pot to help create a more vibrant exchange and create better pricing for everyone,” Terry Semel said in an interview with The New York Times.

“Everything from commodities to collectibles are sold on exchanges so why not ads?” Mark Kingdon, the CEO of Organic Inc. had told us in an earlier interview. The biggest concern about the ad-exchanges has been the liquidity, and if you believe what Mr. Semel writes on the Yahoo blog, then that is one issue that Yahoo is dead set on resolving.

“We think supply and demand should be regulated by the marketplace, not a closed platform,” Mr. Semel writes, taking a swipe at the Mountain View Mandarins. Right Media folks say that Yahoo will be one of the participants in their exchange and other partners can continue to conduct business as usual.

The $680 million in stock and cash may sound pricey, but Yahoo needed to a bold and courageous move in order to stop the relentless march of Google, which has become the dark star of online advertising, with many a few new tricks up its sleeve.

Kevin Kelleher, in an earlier post had very succinctly noted:

<blockquote>the real risk for Yahoo is that Panama is finally catching up to Google right as Google is catching up to Yahoo in its core market of branded – er, banner – advertising.</blockquote>

Google got an ad-exchange as part of the DoubleClick package (and their own internal efforts), and is taking the ad-exchange business pretty seriously. I wonder if Microsoft will make a move?

If they do, they should look closely at wunderloop, a Luxembourg-based company that recently established an exchange and has some nifty contextual advertising technology. Or even consider Fast Search & Transfer, a Norwegian company that today announced a new product that would allow newspaper companies to better monetize their own search instead of banking on say a Google or a Yahoo.

The support for ad-exchanges comes at a time when buyers of ad-inventory are looking for more clarity into what they are buying and where they are buying. The ruthless efficiencies that exchanges, ideally are supposed to bring, will likely create an interesting dynamic in the ad-market place. Any thoughts?