Yahoo buys off Right Media for USD 680 million

Yahoo announced in 30 April 2007 its decision to buy off the rest of Right Media Inc for USD 680 million (it had already bought 20% of the company in October 2006) . Right Media's business model is unique ..... for an advertiser the network facilitates buying media through a transparent process in an auction-based exchange. The model ensures that network barriers come down, giving the advertiser open access to the entire market of sellers and their inventory. Because the advertiser now manages all sellers in a common platform, it gives him a a clear sense of how his advert objectives have been served, where the best new users lie. Bidding for each impression based on the value it generates and therefore and advertiser never overpays .

This acquisition is a strategic move to bridge the gap between rival Google's pay-per-click advertisements that run alongside its search results and also the growing popularity of Google Adwords . It is interesting to note that Yahoo has been trying to migrate to a similar revenue model like Google for quite sometime now , Project Panama is also a step in this direction . However Project Panama has failed to deliver at least till now (as borne out by the Q-1 results of Yahoo) , therefore this acquisition could well be the last throw of the dice by Yahoo to get close to Google . It is also important to note that the Google -DoubleClick deal has been completed only recently and the impressive Q-1 results of Google do not include the financial impact of the deal . Google analysts say that post the deal , DoubleClick is working in creating an ad exchange (which is what Right Media also offers ...)

Financial Implications

At the time of acquisition ,Right Media had around 20,000 advertisers, publishers and networks to its online advertising exchange. In its advert network it has 1,000 customers on whose behalf it sells advertisements and its revenue is projected at USD 70 million this year and is expected to break even by the end of the year

Financially I don't think this acquisition is going to make a difference to Yahoo's results this year , because the deal is expected to be closed in Q-2 of this year . Analysts say that the valuation's are a bit pricey , however strategically the deal is expected to boost Yahoo's fortunes in the display advertisement business .

In conclusion

Considering the deal price and the fact that DoubleClick is creating an advertising exchange of its own , I am personally not hopefully that this acquisition would make a significant contribution in reducing the gap between Yahoo and Google in the display advertisement segment....however the Yahoo management is still bullish on Project Panama and what it can deliver .....so lets wait and watch ......