When I was a VP of Ad Sales, I used to get a lot of calls from Revenue Science, Tacoda, and another behavioral targeting firm whose name I can’t quite recall… the concept was great, problem was, I could not imagine many publishers jumping on it: a lot of promise, not much substance early on. And let’s face it, publishers want instant gratification.
I’m not alone in that assessment: “According to eMarketer (June 2007), the behavioral targeting market is set to increase to $3.8 billion by 2011, from $350 million in 2006,” says the press release touting the match made in heaven.
In 4 years (3.5 actually), the market for BT is to grow 10 times? Even the video market that has everyone going loopy is set to grow from about $500M to $3B in that time span. That’s 6x growth. What is it about BT that will explode in 10 years? Not sure, not sure at all.
According to the NYPost.com:
AOL’s purchase of Tacoda, which serves ads to 125 million people across 4,000 Web sites, is part of an ongoing online ad-buying frenzy that was kicked off when Google agreed to buy DoubleClick for $3.1 billion. Microsoft plunked down $6 billion on aQuantive, Yahoo! snapped up Right Media for $680 million and WPP Group plunked down $649 million for 24/7 Real Media.
Notice how the ad frenzy caused asset prices of Doubleclick, 24/7 Realmedia and aQuantive to soar, but Tacoda only fetched $200M $275M despite a market set to grow tenfold?
Don’t get me wrong, this is a great deal for AOL and a reasonable one for Tacoda. But if the market was so ready to explode, why sell now? I think this makes sense for large, massive portals who can’t monetize “long tail” inventory. That’s why Yahoo! invested in 20% of Right Media at a valuation of about $200M and then bought the remaining 80% of it for a valuation north of $800M. That’s also why Yahoo! launched SmartAds, an in-house BT product. At the time, I said:
Yahoo! clearly gave some added credibility to a field that both borders on the useful and creepy. BT firms allows marketers and publishers to refine their ad inventory, so say I go to ESPN then go to CNN, well CNN - if they run BT tags on their site - will identify that I am also in a sports psychodemographic category and sell the ad impressions I generate to a sports advertiser, for example. There are many other ways BT helps marketers and publishers, but that example in a nutshell demonstrates the benefits thereof.
When I worked as VP of ad sales for a mid-sized publisher, I was intrigued with BT but felt that giving up my site’s audience’s DNA to an outside firm was not wise. Then, as a consumer, I’m not sure you want to be able to leave a trail. Sure, cookies do the same thing, and guess what, most people don’t like cookies.
Ultimately, I think there will be a move towards large new media and consumer technology firms wanting to own the data, and not share it with third party BT firms. But that being said, there will be a consolidation in this space, assuming BT firms don’t have unreasonable demands. Something tells me that Yahoo! considered acquiring one of these firms, but someone simply realized that they had enough data and mojo to launch it in-house.
Gee, funny how all of that came true. Tacoda has theoretical value and no one really wants to trust a third-party entity with that task. There was one less taker once Yahoo! launched SmartAds, Google after all has its own BT and it works wonders: it’s called data mining. All to say, I think this puppy has the potential to repeat what the $435M Advertising.com did for AOL: drive a lot of value over time.
Related:
- Yahoo! Gets into Behavioral Targeting
- Top 10 Web M&A Deals of All Time
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