Yahoo! is aggressively building out a branded advertising network. By acquiring Right Media, Yahoo! aims to accelerate the monetization of its non-premium inventory (such as social assets like Yahoo! Answers) at significantly higher prices. The Exchange is expected to enable Yahoo! to use behavioral targeting to achieve greater pricing for ads shown to Yahoo! users on third-party sites, without the Exchange sharing any personal information about the user. By scaling the open transparent ad exchange, Yahoo! hopes to attract significant new partners to its branded advertising network, building on the momentum it has seen with recent deals with eBay, 200+ major newspapers, Viacom, and Comcast. Yahoo! announced it would acquire Right Media for $680 million. Prior to the announcement, Yahoo! held a 20% stake in the advertising exchange acquired in October 2006 for ~$40 million, a valuation of $200 million for the company, or 3x 2007E revenue of $70 million. The acquisition of the remainder of the company will be 50% cash and 50% stock from management, RedPoint Ventures, and others. Yahoo! is valuing Right Media at $850 million, or roughly 8x 2008E revenue forecast of $110 million, and 50x 2008E estimated EBITDA of $17 million. The transaction is expected to close late Q2 or early Q3 of this year, subject to regulatory approvals.
Right Media operates the largest emerging online advertising exchange, serving banner and other branded ad formats from about 20,000 advertisers throughout the web. RMX Direct pits advertising networks against one another, awarding ad serving rights to the advertiser paying the highest cost per impression (or cost per action). The exchange is an open, transparent network for publishers and advertisers, enabling publishers to identify which advertisements (i.e., by advertiser, format, or ad size), and ad networks perform best for them. Today, Right Media’s exchange includes more than nine partner advertising networks (e.g., Right Media’s own Remix Media ad network, CPX Interactive, Bannerconnect, Adtegrity.com, Oridian, Active Response Group, Rydium, Accelerator Media, and Directa Networks). Right Media charges networks a monthly fee to access its ad inventory, in addition to taking a ~7% commission on revenue from ads run through RMX Direct. The company primarily markets undersold inventory from less trafficked parts of the web, but also includes emerging social media sites popular with coveted demographic groups. The Right Media Exchange reaches about 1,000 publishers (representing about 10,000+ individual publishers), including Fox Interactive Media (MySpace), Six Apart, Lycos, Tribune, Looksmart, and Tickle.
Right Media should hasten Yahoo!’s build-out of a branded advertising network, enabling it to access and sell more inventory to its branded advertisers. Already, the company is announcing a long-term display advertising contract with Comcast. Looking forward, Yahoo! sees synergies, as multiple network partners may sell Yahoo!’s unsold inventory. Early sales of Yahoo!’s remnant inventory on the exchange generated a 50% improvement in CPMs. At the same time, Yahoo!’s premier branded ad salesforce will have access to incremental Right Media inventory to market to its leading brand advertisers. Yahoo! Has been successful in bundling Right Media inventory with its own premium inventory to enhance its branded growth rate in the fourth quarter of 2006. Yahoo! also has a multiyear strategic partnership for online display and video advertising services with Comcast.net, which is a top 10 online site, with more than 2.5 billion page views, more than 80 million videos viewed, and 15 million unique visitors per month. In addition, Yahoo! has expanded agreements with eBay (for Yahoo/PayPal Checkout capability, as well as display and search advertising across the site); Viacom (to provide search, contextual and display advertising on 33 of its leading sites); and McClatchy (which joined the “newspaper consortium” of twelve companies and 200+ newspapers that will gain a Yahoo! search box, Yahoo! toolbar, content distribution, and Hot Jobs listings).
Right Media operates the largest emerging online advertising exchange, serving banner and other branded ad formats from about 20,000 advertisers throughout the web. RMX Direct pits advertising networks against one another, awarding ad serving rights to the advertiser paying the highest cost per impression (or cost per action). The exchange is an open, transparent network for publishers and advertisers, enabling publishers to identify which advertisements (i.e., by advertiser, format, or ad size), and ad networks perform best for them. Today, Right Media’s exchange includes more than nine partner advertising networks (e.g., Right Media’s own Remix Media ad network, CPX Interactive, Bannerconnect, Adtegrity.com, Oridian, Active Response Group, Rydium, Accelerator Media, and Directa Networks). Right Media charges networks a monthly fee to access its ad inventory, in addition to taking a ~7% commission on revenue from ads run through RMX Direct. The company primarily markets undersold inventory from less trafficked parts of the web, but also includes emerging social media sites popular with coveted demographic groups. The Right Media Exchange reaches about 1,000 publishers (representing about 10,000+ individual publishers), including Fox Interactive Media (MySpace), Six Apart, Lycos, Tribune, Looksmart, and Tickle.
Right Media should hasten Yahoo!’s build-out of a branded advertising network, enabling it to access and sell more inventory to its branded advertisers. Already, the company is announcing a long-term display advertising contract with Comcast. Looking forward, Yahoo! sees synergies, as multiple network partners may sell Yahoo!’s unsold inventory. Early sales of Yahoo!’s remnant inventory on the exchange generated a 50% improvement in CPMs. At the same time, Yahoo!’s premier branded ad salesforce will have access to incremental Right Media inventory to market to its leading brand advertisers. Yahoo! Has been successful in bundling Right Media inventory with its own premium inventory to enhance its branded growth rate in the fourth quarter of 2006. Yahoo! also has a multiyear strategic partnership for online display and video advertising services with Comcast.net, which is a top 10 online site, with more than 2.5 billion page views, more than 80 million videos viewed, and 15 million unique visitors per month. In addition, Yahoo! has expanded agreements with eBay (for Yahoo/PayPal Checkout capability, as well as display and search advertising across the site); Viacom (to provide search, contextual and display advertising on 33 of its leading sites); and McClatchy (which joined the “newspaper consortium” of twelve companies and 200+ newspapers that will gain a Yahoo! search box, Yahoo! toolbar, content distribution, and Hot Jobs listings).
Advertisers are apparently very interested in a strong second choice to Google. With solid execution, Yahoo! should be well positioned to meet that demand. Moreover, competition with Google/DoubleClick could bring Microsoft back to Yahoo! and foresee a future advertising partnership there, for the graphical ad exchange, mobile advertising, and/or search back-fill. Yahoo! looks to monetize its social networking properties and leverage Right Media to benefit from behavioral targeting off of Yahoo! To date, Yahoo! has done little to monetize Yahoo! Answers, Flickr, or del.icio.us, to name a few of its popular social networking assets. Right Media acquisition is expected to bring improved revenue generated from the traffic at these sites. Behavioral targeting could also be employed leveraging the Right Media Exchange. For example, a Yahoo! autos visitor could be targeted by the Exchange when visiting a smaller, alternative website (generating a higher CPM for the site), without sharing data about the user. In this way, Right Media could serve advertising to Yahoo!’s users when they are visiting other properties, off of the Yahoo! site. Downstream, the media network can be expanded to include mobile, text, and/or video advertising.
The Right Media Exchange could soon face competition from an online advertising exchange to be launched by DoubleClick (expected to be acquired by Google by year end). Right Media puts Yahoo! In competition with DoubleClick, which is a leader in serving branded ads throughout the web on behalf of 1,500+ advertisers and agencies. Moreover, DoubleClick announced that it plans to introduce an auction-based advertising exchange. The DoubleClick Advertising Exchange service is in limited testing in the United States with about 35 advertisers and publishers, and is expected to be available globally by the end of 2007. At this juncture, it is well behind the two-year-old Right Media Exchange, which processes more than 6 billion transactions daily, according to Yahoo!
Thanks Susquehanna Financial Group, May 2007
The Right Media Exchange could soon face competition from an online advertising exchange to be launched by DoubleClick (expected to be acquired by Google by year end). Right Media puts Yahoo! In competition with DoubleClick, which is a leader in serving branded ads throughout the web on behalf of 1,500+ advertisers and agencies. Moreover, DoubleClick announced that it plans to introduce an auction-based advertising exchange. The DoubleClick Advertising Exchange service is in limited testing in the United States with about 35 advertisers and publishers, and is expected to be available globally by the end of 2007. At this juncture, it is well behind the two-year-old Right Media Exchange, which processes more than 6 billion transactions daily, according to Yahoo!
Thanks Susquehanna Financial Group, May 2007
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