Blue is the new Black

Pretend for a second that you just got back from vacation and didn’t happen to see the flurry of blog posts on Tuesday afternoon and articles yesterday. That way the answer to this question won’t come quite as easily. Even if you do know, see if this doesn’t show the landscape in a slightly different way. Below, you’ll find comScore data from July 2007 for the top web properties including ad networks. One of the below made the purchase while another on the list got purchased. Which would you guess as the buyer? As the acquiree?

You might already know, the answer, but let’s look at the list again adding more context.

If someone had shown me these lists and asked the original question, I would have guessed – Valueclick first (only due to the on again off again talk of Microsoft taking them), Tremor third given their video expertise, and next I would have gone smaller and looked for those with the buzz (Centro) that might be a value or those that have backers with deep connections (Adbrite). Given the recent acquisition of Right Media by Yahoo, Doubleclick by Google, and Avenue A/Razorfish by Microsoft and 24/7 by WPP Group, I probably would have not guessed any of the other survivors that have garnered little mention by analysts and pundits – Tribal Fusion, Blue Lithium, Specific Media, Casale (numbers five through eight respectively). If a company wanted to pick up an ad network, they would have already, correct, especially since we are talking about one of these on the list buying another? Still, who would have guessed that Yahoo would have acquired Blue Lithium, price $300 million cash. On Tuesday, they did, or at least they announced that both entered into a "definitive agreement," one that will most likely not have any issues or Microsoft trying to call foul.

Getting back to why, not having an inside connection, I can only speculate. It certainly came as a surprise given that in April, they completed their $850 million purchase of Right Media, whose business feels like a network of networks. Reading through the quotes from Yahoo execs, though, we can start to make a guess as to why. Let’s start with new CEO and co-founder Jerry Yang. He says, ""BlueLithium’s products, technology and team will be an integral part of our drive to build the industry’s leading advertising and publishing network." Not much there. The release also attributes him with, "This acquisition will extend our ability to deliver powerful data analytics, advanced targeting and innovative media buying strategies to our customers, who are increasingly looking for these insights." There’s a hint of something, a suggestion that Yahoo’s targeting isn’t there or that Right Media somehow doesn’t give them what they need. We’re getting somewhere when he adds, "By leveraging BlueLithium’s complementary expertise and tools, we will be able to better address the needs of our performance-based display advertisers and enhance the value of our publishers’ inventory."

Here’s president Sue Decker, "The combination of BlueLithium’s network and Yahoo!’s engaged audience will provide an unprecedented buying opportunity across what we believe will be one of the world’s leading online display ad networks, and BlueLithium’s expertise in network management will better enable Yahoo! to manage supply and demand across our network, by balancing advertiser goals with publisher value. Building on our acquisition of Right Media, this transaction demonstrates our commitment to increasing our investments in areas which can most contribute to Yahoo!’s long-term success." Now, Todd Teresi, SVP, Yahoo! Publisher Network, "Advertisers seek essentially three different outcomes when they buy display (or graphical) ads online — either to build brand awareness, promote something new, or drive some kind of transaction (a lead, a sale, a new customer). The latter, known as performance marketing, has been exploding online over the past year because it’s typically served around social media content, where there’s no shortage of inventory. It’s an area in which our teams have been working feverishly to provide better solutions. Their jobs just got easier." Blue Lithium provides "access to valuable audiences and increasing our ability to sell performance-based campaigns both on and off our network. They provide the dashboards and insights our performance customers have been asking for — capabilities that have been a bit of an Achilles heel for us. This is the logical next step as we build what we believe will be one of the world’s leading online display ad networks, which includes inventory on Yahoo!’s owned and operated properties, our affiliate network (our partnerships with eBay, Comcast, and our consortium of nearly 400 newspapers), the Yahoo! Publisher Network, and the Right Media Exchange."

The takeaways:
1) Yahoo admits help. They should have purchased Advertising.com, but that’s not available. Valueclick would have been messy and tarnished their brand. Tribal didn’t (a guess) have the tech. They mention performance advertising multiple times, and that’s just what Advertising.com did extremely well, they could lift up the value of premium inventory using performance based campaigns; that gave them the quality and the scale to obtain the highest payouts from advertisers. There has been no shortage of praise for that purchase and its impact.

2) Watch out Q3 numbers. The mortgage bust has only recently swung into gear. This purchase might not connect to the mortgage issue, but the continuous mention of performance advertisers leads me to think something is up.

3) Yahoo Ad Network. They are looking to diversify away from their own internal inventory in a hurry, and now we see them start to use language like online display ad network. They can make arrangements to represent other sites inventory, but with this purchase they say there is no better way to manage it than through an ad network platform (as opposed to simply putting all inventory on an exchange).

So, who’s next?