While I was toiling away building ad sales from premium advertisers, others were laying the foundation to some of the more successful, read sexy, stories this year.
Yesterday, Yahoo! bought the 80% of Right Media it did not own.
Today, capitalizing on the demand for online advertising services, Context Web released ADSDAQ, which is modeled on the NASDAQ principles that allowing publishers to set an “asking price.” This of course, runs counter to a service like Right Media whereby publishers get a cut from the bidding price of the winning advertisers.
Like Right Media, Context Web was one of the many, many companies to hit me up over the years, first at my old company, then at WatchMojo.com.
I spoke to SVP Jay Sears and John Ebbert, Director of Customer Marketing today.
Q: Where does Context Web fit in the lansdcape, amongst Google, Quigo, Industry Brains, etc.
A: ContextWeb is a contextual advertising company. We currently work with 350+ advertisers and over 1,000 publishers including 100+ of the comScore top 250. We reach 54 million unique users each month, over 1 in 4 Americans.
Q: How long has this (ADSDAQ) been in development?
A: ADSDAQ has been in development for two+ years. Our existing scale will allow us to act as traders on behalf of our large advertisers and publishers as we begin to open up the exchange to publishers and advertisers of all sizes via a self service platform.
Q: Yesterday Right Media was in the news, how is this different/similar to RightMedia?
A: ADSDAQ is an exchange for premium inventory, open to everyone, where all traders can set their AskPrice™ and BidPrice™:
· Pricing Control:
ADSDAQ provides pricing control–BidPrice™ for the advertiser and AskPrice™ for the publisher—to both parties for the first time.
· Premium Inventory:
ADSDAQ is an exchange for premium inventory, not remnant. Since the publishers will set their CPM (cost per thousand) AskPrice, the ADSDAQ exchange is a “first stop” for inventory prior to a publisher’s ad network alternatives. Our ContextAd™ page level targeting provides the control to advertisers to make our exchange inventory “brand safe” and eliminate waste.
· Open to Everyone:
ADSDAQ will be open to all publishers and all advertisers, large and small; short tail and long tail. Immediately we are trading on behalf of advertisers and publishers in our existing network business1. This summer we will be opening a self service offering to all publishers and later this year will be doing the same for advertisers. Publishers and Advertisers can Request an ADSDAQ Beta Invitation. More detail on our Internet Advertising Blog.
Q: What impact does the RM / YHOO deal have on your plans for this?
A: We are quickly becoming the leading independent exchange and are the only one focused on premium inventory (not remnant).
Q: Do you see a divergence or convergence between text and display?
A: There will be a convergence between all media formats. The exchange provides the marketplace and ultimately will enable the buying and selling of any format—text, display, rich media, video, mobile.
Q: Planning on moving into display? video?
A: The vast majority of our inventory today is display ads from large national and international brands. We already run video thru various rich media formats such as Pointroll and Eyeblaster.
Q: Do you view the long tail of ad inventory as a major growth area or is it because a network has a hard time accessing premium inventory?
A: Because publishers can set their AskPrice, ADSDAQ acts as “inside sales for the long tail” by delivering pricing control, ad trafficking and ad serving to publishers. ADSDAQ will always produce a better result for the publisher vs. its existing ad network alternatives.
The customers have moved to the Long Tail and ADSDAQ will give advertisers the tools to make the long tail a “clean well-lit place” How is this complementary to Context Web’s core products? We’ll be acting as traders on the exchange for our existing, large advertiser and publisher clients.
Q: Any clients and partners that have signed up yet?
A: All of our current advertisers and publishers will be part of this exchange. This summer we will be opening a self service offering to all publishers and later this year will be doing the same for advertisers. Publishers and Advertisers can Request an ADSDAQ Beta Invitation.
Q: ContextWeb investors include leading venture capital firms Draper Fisher Jurvetson and Updata Partners - any financial info on financing to date, revenue figures etc., you can share?
A: The company has $27.5 million of invested capital. Our current business has grown from zero to 54 million monthly uniques and over 3 billion monthly impressions in two years.
Read more around the Web. I think the ad format agnostic approach is a plus, and the fact that they strive to position themselves in premium content from the get-go is critical. Of note, Context Web’s $27.5M is almost 60% of the funding Right Media had… what does that mean? Whatever you want it to mean, but it is interesting how much money went into some of these companies and the rising tide ride in online advertising is now rising all boats.
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WatchMojo NewsletterThe headline of this post ends with !? because Yahoo!’s name includes a “!” and the sentence is in fact a question.
But, even were it not the case, upon finding out that Yahoo! had shelled out $680M for the 80% of Right Media it did not own (after paying $45M for 20% of the company six months ago), any headline would have been followed by !?$%$(*&#.
The Business Model: Do ya get it?
When Right Media launched in 2003, I got a call in my capacity as VP of Ad Sales of an online publisher. Right Media told me what they did: in the words of a current executive, Right Media is ”an enabler that provides tools and techniques to participants and creates a virtual space to do business more efficiently. We serve like a stock market, we price display ad inventory and allow participants to discover as much as players allow to be discovered within the ecosystem and we make the data transparent…”
In 2003, I spoke to a couple of brothers who worked at Right Media, they wanted me to grant them a portion of our ad inventory for them to price and auction off to other networks. We did 250M ad impressions per month, and we sold out some 75% of the ad inventory, the remaining 25% we doled out to networks. These networks paid us anywhere from $0.25 CPM to $1 CPM. On the premium inventory, I’d be able to sell that for anywhere from $1 CPM to $20 CPM.
CPM stands for cost per one thousand of ad impressions. For more on CPM and other terms, as well as a landcape of all of the participants of the online ad ecosystem, click here.
A Practical Example
At the time I was as cordial as could be, but I did not have much time to allocate to Right Media’s offering, because we generated $190,000 per month from the 75% of our ad inventory that we sold out to advertisers large and small, and made about $10,000 from the networks. Even if that grew 100%, to $20,000, I figured that my time would be better served focusing on the 75% of premium inventory that we had.
To some extent, I was right. To some extent, I was wrong.
We had 250M ad impressions, selling out 75% to premium advertisers was feasible. When you are a large publisher with billions of ad impressions, you tend to sell out even less. At the end of the spectrum, for sites like MySpace and Yahoo!, you sell out a lot of less and are left with remnant inventory.
Long Tail of Ad Inventory
Yahoo! sells out a lot more of their inventory as premium compared to MySpace, the reasons for that are numerous, but one major one is that MySpace is user-generated content and less desirable to advertisers. If you add all of the variables and consider that today user-generated content accounts for more aggregate traffic than adult content does, you start to understand that times have changed, and many people found value in Right Media’s - and networks’ in general - offering.
Right Media, knowingly or unwittingly, was positioning itself for the burgeoning traffic coming from the explosion in user-generated content. This is not to say that all of Right Media’s business emanates from user-generated content, it’s to demonstrate one source of demand for Right Media’s offering, an exchange matching buyers with sellers of ad inventory in an auction format.
That last part, my friends, is the key. What eBay did for Pez dispensers, Right Media sought to do for the $20B online ad industry. In other words, the ad inventory I represented was largely irrelevant to Right Media, but the large majority of the ad inventory that was to mushroom online would be a perfect fit for Right Media.
Times, They Change
Fast forward that to yesterday’s announcement that Yahoo! was paying $600M+ for Right Media’s 80% that it did not own.
Don’t get me wrong, I am not saying the deal was a bad one, I am saying that as both a writer covering the space, someone who had worked with Right Media in the past, a shareholder in Yahoo! and a web entrepreneur positioned in online advertising, I fell off my chair.
Some people like Fred Wilson shouted hooray, others did the opposite, questioning the rationale:
“Now that they’re owned by one of the largest sellers of space on the Web, does that make Right Media less of a middleman?” said Jeff Ratner, North American digital director of MindShare Interactive. “Will I find more of my inventory winding up on Yahoo as opposed to somewhere else?”
I am not sure, maybe, who knows? All I know is that Yahoo! has a lot of impressions, of which little is premium. Yahoo! needs a better way to monetize this long tail (hate that word, because people apply it to everything, but it does apply here…) inventory. As a Yahoo! shareholder, that gets me excited, but the flip side is that Yahoo!’s CFO Sue Decker was quick to add: “Yahoo’s shareholders shouldn’t expect to see profits from this investment until at least 12 months after the deal closes, if the companies follow through on their immediate intentions to improve the marketplace, then media planners, buyers and publishers may see the changes quickly.”
Hmm, that’s a lot of “if’s” for a company that quadrupled in value in six months. Of course, Right Media itself has soared in size, particularly since the Yahoo! 20% investment.
According to itself back in February 2007:
“Right Media Exchange revenue has increased 81% over the past six months, with 566 billion ad impressions traded during the period.”
The milestone represents only a partial measure of Right Media’s broad, substantial growth since it formally launched the Right Media Exchange last summer. In that period, the company has also seen a 50% increase in headcount, a 49% increase in Exchange membership and an 84% increase in impressions served. Over one trillion impressions have been served on the Exchange since the company launched its auction platform in April of 2005.
“All signs point to the fact that the digital advertising market is embracing the exchange model,” said Right Media CEO Michael Walrath. “Buyers and sellers on the Right Media Exchange are getting a fair opportunity to develop new relationships, increase scale and drive more value, and they’re clearly taking advantage of it.”
There are currently 127 network, advertiser and publisher members with seats on the Exchange, including Yahoo!, Fox Interactive Media and LookSmart. Exchange members represent over 6,000 buyers and 13,000 sellers. More than 175,000 creatives are currently active in the Exchange.
There are cases where Right Media has done wonders, ZDNet points to Tickle.com as an example where it saw a 771% spike in revenue. That’s not bad at all. I wonder how much the $10,000 I generated from 25% of our non-premium inventory would grow at a growth rate of 771%. Of course, demand for online ads have changed quite a bit since then, but you get my drift.
Value is in the Eye of the Beholder
Is Yahoo! getting something valuable? Of course.
Would I pay $800M for it? Well, as I said yesterday, iVillage fetched $600M, MySpace parent Intermix got $580M and my former one-time employer IGN got $650M from News Corp. Of course, this was all over two years ago. Last month, Google paid $3.1B for privately held DCLK.
Wait a minute… Right Media too is privately held… could it be suddenly that public shareholders are showing restrain while their private brethren are not? Of course, Right Media and Doubleclick were acquired, not by public shareholders directly, but by managers of these, at Yahoo! and Google respectively.
When the Google/DCLK deal went down, I wrote aplenty on that:
- Google Buys Doubleclick for $3.1 Billion; Blocks MSFT Acquisition
- Questions in Wake of DCLK/GOOG Deal; MSFT/YHOO Repercussions?
- Two Variables in DCLK/GOOG Deal: Dart for Publishers/Advertisers; All Cash Deal
- Why GOOG’s DCLK Makes Little Sense (To Me)
- DCLK Winners: Hellman & Friedman; Losers? DCLK’s Shareholders?
- aQuantive Under Spotlight
One of my main points of contention in that deal was that saying that DCLK gave Google an “in” into the display business was akin to saying that MSFT was in real tight with ad agencies because agencies use powerpoint in client pitches, in other words, DCLK’s strength was in software, and not media, ever since it unloaded its media business to MaxOnline/L90.
One reader of this blog who agreed was Right Media’s own Vice President Bennett Zucker, as he commented to one of the old posts.
I’d argue that Google was practically reckless in paying so much for DCLK, and Yahoo! showed some eagerness to maintain its lead in display advertising, and perhaps arguably fear as well, and Right Media did the sensible thing for its shareholders by gladly accepting this offer. Their venture capital backers Redpoint must be ecstatic, as are the staff at Right Media.
I spoke to Bennett today about the deal.
Hailing from the world of publishing, Zucker serves as an evangelist for Right Media’s exchange, trying to convince publishers to give it a try. He’s also served some time at Tacoda (wouldn’t they love an exit like this one, by the way?) in the area of behavioral targeting…
I asked Bennett:
Q: What on earth transpired between last fall and this spring besides Christmanukwanza?
A: “We had been working with Yahoo! for a year before the 20% investment materialized, and Yahoo! did a lot of tire kicking before it became a customer. Yahoo! has since been trading a lot of its non-premium, and I mean deep, real deep inventory on the exchange. And, the result validated things and they were really successful.”
Q: Did other companies show an interest to invest or buy them afterwards?
A: “Once that happened, the floodgates opened and all lingering doubts evaporated.”
Q: What was it that made Yahoo! value you so much more today than they did six months ago?
A: Sue Decker pointed out three things in her analyst call yesterday:
1 - increased value of YHOO’s own inventory;
2 - extend YHOO’s inventory across the Web;
3 - create new businesses working together.Q: Do you expect changes in structure, personnel?
A: We had aggressive hiring plans, and they got more aggressive. CEO Michael Walrath will now report to Sue in Sunnyvale.
Q: Is this an answer or challenge to Google, or are we all supposed to think it’s not?
A: We were working with Yahoo! months before Google and Doubleclick closed, so while it is certainly related in some ways, it’s not totally coming out of nowhere.
Q: Fair enough, but isn’t this an acknowledgment or admission by Yahoo! that they see little growth in their core premium inventory and need to look at non-premium?
A: Clearly there is a lot of value in boosting rates on non-premium, which runs deep on Yahoo!, but I would not rule out high-end opportunities.
Q: Are we in a period of euphoria? I mean, Yahoo! paid what they did for you, good for you. But today we hear that MSFT might buy TFSM for $1B, which is madness, it was worth $400M on Nasdaq two weeks ago… I would not call it a bubble, because stock prices of TFSM, AQNT (a stock I own) and VCLK actually fell because an analyst at Citigroup cut the rating for AQNT… which shows some common sense… but don’t you get a sense that something is off?
A: Well, we certain are happy and euphoric. We will obviously eventually reach a limit. But in the end we feel that we can do a lot with Yahoo!
As a Yahoo! shareholder that just paid a chunk for your business, I sure do hope so.
Interestingly, while everyone got excited about this, the main story of the day - in my humble opinion - was Comcast’s deal with Yahoo! That was a great one. Read more about the details here. Of course, the irony of it all is grand, Yahoo! just got the right to sell ads on Comcast, which means a little bit more of premium ads with a helluva lot of non-premium inventory… having Right Media in-house might make that deal even better.
Last week when I got back from the Economics of Social Media (recap here), I said I would be making a couple of announcements this week pertaining to our company, Mojo Supreme. The announcements had to do with WatchMojo.com, our Web TV unit which has grown into a leader in the production and syndication of web video for broadband platforms. I’ll be making those announcements later on this week. It’s nothing earth-shattering, but it does validate what we’ve been saying all year since we launched January 23, 2006.
Anyway, this post is not really an announcement, and it does not involve WatchMojo.com, but rather, our search unit MetaMojo.com. As readers of this blog know, we have developed a video meta search since, but our first foray was a vertical search network.
Four months after announcing that he wanted to launch a Google-killer (here’s our head-to-head-to-head comparison of the search engines, by the way), Wikipedia co-founder Jimbo Wales announced that Jabber Founder Jeremie Miller Joins Forces with Jimmy Wales to Build Open Search Platform.
“Jeremie is a brilliant thinker and a natural fit to help revolutionize the world of search,” Wikipedia and Wikia co-founder Jimmy Wales said in a statement. “I believe Internet search is currently broken, and the way to fix it is to build a community whose mission is to develop a search platform that is open and totally transparent.”
Between then and now, Wales has gotten everything from criticism, ridicule and encouragement to develop something that can enhance the search landscape. Of course, taking on Google is akin to having a death wish. When I launched our search products, I had a full-time job, it was a hobby, a personal exercise in playing with an API, which then grew into more.
The focus is in our video content unit WatchMojo.com, but as that audience builds up, having a search within the network adds an interesting twist (much like having a matching community like StreetMojo.com). Since our audience is watching videos we produce, we decided to add a video metasearch. But since not everyone watches videos yet, we also have a vertical text-content based search tool that brings back contextual results from best of breed publishers.
In fact, with Google accounting for 50% market share, and Yahoo!, MSFT, InterActive Corp.’s Ask and Time Warner’s AOL locking up the top 5 search positions, search is both a risky and rewarding segment of online commerce and communications.
Search is the hubris of the Web space: MSFT might die because of it (well, not really, but you know what I mean), Yahoo!’s Terry Semel might be fired over it, and Jimmy Wales might lose his credibility and hurt his Midas-esque track record by venturing in it.
Anyway, over Christmas 2006, when Wales made his announcement, he indicated that he wanted to use the Nutch open source platform. Having built our own MetaMojo.com domain specific vertical search engine using Nutch, and naturally respecting Wales for what he’s done, I reached out to him with a “good luck, by the way, we have already done a large component of what you wish to do… let me know if you want to collaborate.”
For the mojo and vision behind MetaMojo.com, click here. We focused on vertical search, then video meta search, this year we’ll be focusing on personalization and social search.
Anyway, Wales showed interest, then, and again this weekend when I followed up with him. He put me in touch with Jeremie, though asked that I not disclose it until the information was made public. I chatted with Jeremie yesterday and am glad that this is moving along, though I have no clue whether it will ever really take off. Why? Read on.
What is Wales trying to do?
According to a story on News.com:
The Wikia project aims to develop a search engine, crawlers and other indexing tools through a collaborative, open-source process.
Of course, Wikia’s CEO Gil Penchina is right when he says that “smaller search companies that don’t have the time or money to do everything required for a complete search service themselves” might be interested in what Wales’ Wikia is trying to do, but let’s not forget one fact: unlike Wikipedia.org, Wikia is a for-profit venture.
In fact, as the same News.com story points out, “the complete business plan has yet to be worked out, but profits and revenue may be derived from advertising or services,” according to Penchina.
“The intellectual property behind Wikia, however, will be freely licensed under standard open-source mechanisms.”
That sounds great in principle, in practice, it might be what hinders the project. After all, as I have explained in depth, we intend on growing MetaMojo.com within the Mojo Supreme network. Like I say, imagine if MySpace had an in-house search unit, what would the value of Intermix been then? Sure, there’s only one MySpace… but no one said we wanted to be MySpace either.
Having seen Google become the most powerful entity in new media and technology on the strength of search IP, Wikia’s main challenge is determining what is open and what is not. It’s easier said than done.
When the mailing list was made aware of Jeremie coming on board, he added: “one of the areas I’ll personally be coding and developing is around an open protocol and how it can play what I think is a very cool role in building a search technology community.
I spoke to him yesterday after Jimmy introduced me, I wish him luck and we’ll see how and if we collaborate as we each try to improve the search ecosystem.
But the fact remains, there are not that many open-source billionaires walking around, and there’s a reason for that. In search in particular where distribution is everything and technology is secondary, one needs to be very clear on what the business strategy is and will be.
For better or worse, Google had Yahoo! In other words, it’s not the technology. And before academics, other search companies etc. will want to partner in building out equity for Wales’ project, he will have to understand that Google envy will be his greatest challenge.
We told you, search is the ultimate manifestation of hubris online. Upon our initial chat, we seemed to be on the same wave length if that means a collaboration, time will tell.
Hey, it’s all about transparency and openness, right?
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