Yahoo! Inc., chasing Google Inc. in the online-advertising market — plans to buy BlueLithium for $300 million, acquiring the fifth-largest U.S. ad network…
San Francisco — Yahoo Inc. on Tuesday announced that it has struck a deal to buy BlueLithium, the fifth-largest U.S. online ad network, for $300 million in cash, in the latest move to consolidate the fast-growing behavioral ad targeting market.
The acquisition would help boost Yahoo’s effort to develop a third-party advertising network, and the ability to serve individually targeted display ads – like banners or interactive graphics – and to better compete with rivals such as Google and Microsoft in a growing area of online advertising.
San Jose, California-based BlueLithium, is the fifth-largest advertising network in the US and second-largest in the UK, with 145m unique visitors a month. Founded in January 2004 and backed by Walden Venture Capital and 3i, BlueLithium’s bread and butter is aggregating and reselling banner ad inventory to marketers.
It specializes in behavioral advertising, serving relevant ads by tracking the surfing patterns of users. Behavioral targeting allows marketers to target users based on the sites they have visited, as well as demographic and geographic characteristics.
The deal, announced on Tuesday, bolsters Yahoo’s existing behavioral ad-targeting efforts with its 250 million-strong base of Yahoo Mail users and Yahoo Travel, an analyst said. Yahoo recently launched SmartAds, a nascent effort in this area.
The acquisition marks the first major transaction for Yahoo since co-founder Jerry Yang returned as chief executive officer in June. Coupled with the purchase of Right Media Inc., completed last month, BlueLithium may help Yahoo bolster advertising revenue after three years of declining sales and market share losses to Google.
“BlueLithium’s products, technology and team will be an integral part of our drive to build the industry’s leading advertising and publishing network,” said Jerry Yang, Yahoo chief executive.
“We saw this as the next logical step,” Todd Teresi, senior vice president of the Yahoo Publisher Network, said in an interview. The acquisition will help the company and its partners earn a “greater return on their pages,” he said.
“The acquisition also gives Yahoo a leg up in performance-based marketing, which allows advertisers to pay only when a user takes a certain action, such as clicking an ad, filling out a form, or buying something.”
Up until now, Yahoo’s banner advertising efforts—as on the Yahoo portal homepage, for example—have focused on brand advertising from large companies that pay based on the number of views by users. The acquisition could give Yahoo access to a new market, since performance-based advertising tends to be done more by small- to mid-sized companies.
Yahoo has also been undergoing severe management turmoil for the past nine months, with key executives, including former chief executive Terry Semel, handing in resignations – sometimes at the request of Yahoo’s leadership and sometimes not.
In June, co-founder Jerry Yang replaced Semel as chief executive while former chief financial officer Susan Decker was named president.
And just last week, the company announced a major reorganization and confirmed that Gregory Coleman, executive vice president, global sales, would leave the company in February under a continuing reorganization that was launched in December.
Among the changes has been the consolidation of sales forces responsible for search advertising and display advertising into a division that includes HotJobs recruitment advertising, corporate partnerships and the publisher network.
Other departing executives included are: chief operating officer Daniel Rosensweig, media czar Lloyd Braun, technology chief Farzad Nazem and two top salespeople.
The BlueLithium deal comes a little over a month after Time Warner Inc’s AOL LLC unit said it would buy Tacoda Inc., paying $275 million in cash, according to a source close to the deal.
Both companies use so-called cookie technology, small data files that record the Web surfing habits of different types of consumers, allowing advertisers to target more specific types of ads based on different types of audience demographics.
“The goal over time is for consumers to only get pinpointed ads,” Emily Riley, an advertising analyst at JupiterResearch said of the promise of behavioral targeting.
“This really gives us the ability to ‘deliver’ more relevant advertising to consumers not only on the Yahoo network but also off the network,” Teresi, said in a phone interview.
In July, BlueLithium reached nearly 120 million users, or two-thirds of the U.S. online audience, ranking behind AOL’s Advertising.com, ValueClick Inc., Google Inc’s ad network and Tribal Fusion, according to comScore data.
BlueLithium is an invitation-only network of roughly 1,000 sites that adds to Yahoo’s growing ad network. Besides Yahoo’s own properties such as news, sports and travel, other parts include the Yahoo Publisher Network of affiliated sites and Right Media Exchange, which reaches a wider range of sites.
BlueLithium connects marketers like FTD.com, Gevalia Kaffe or The New York Times to online customer segments like “online poker players” and “lonely hearts” or does geographic targeting based on zip codes or top metropolitan regions.
Founder and Chief Executive Gurbaksh Chahal will remain with BlueLithium for an “interim period” of integration, the companies said in a statement. Chalal previously had founded ClickAgents in 1998 and sold it to ValueClick for $70 million.
BlueLithium has 135 employees in the U.S. and Europe, and has doubled in size each of the past three years, according to the company’s Web site. Yahoo plans to keep all the employees and has yet to determine where they will be located, Teresi said.
The transaction, subject to customary closing conditions including regulatory approval, Yahoo expects the cash deal to close in the fourth quarter. Evercore Partners Inc. served as financial adviser to BlueLithium on the deal.
The company will become a wholly owned unit of Yahoo.