Forgive me for scratching my head upon hearing of Blue Lithium's acquisition by Yahoo! for $300 million. Immediately after the announcement, I found myself reading up on the comments from analysts and wondering what I was missing.
At first, I thought Yahoo was looking for technology. Indeed, many of the analysts on the outside looking in at the Yahoo-Blue Lithium deal speculated that much of it was technology-driven, with Blue Lithium adding to Yahoo's behavioral targeting arsenal. I scratched my head because Yahoo already has one of the most robust behavioral targeting offerings on the web.
Then my thoughts turned to what else the larger ad-supported portals are looking for. Wants are tied to technology, to a degree, but they're most closely aligned with strategically building scale.
Yes, Blue Lithium adds to Yahoo's ability to sell online advertising profitably. With Yahoo's earlier acquisition of Right Media, the company now has a platform by which to better monetize online inventory. Although Yahoo's existing inventory avails gives the company plenty to sell, having a wide range of inventory and reach to sell via an ad exchange helps keep all kinds of ad buying clients happy.
The access to inventory alone isn't enough reason to get a company like Yahoo to pay out $300 million, though. In order to compete with Google, AOL and other players, Yahoo needs to broaden both its reach and its offering. Yes, this is about the Quest for Scale I wrote about last month.
Internet advertising's targetability has been both a blessing and a curse. Years ago, the industry brought contextual, behavioral and data profile-based targeting options to bear on advertiser initiatives. While advertisers reacted favorably to the ability to reach the sweet spot of their target audiences, demand for targeted inventory skyrocketed while untargeted inventory plummeted in value.
Rather than convince the advertisers to tolerate spill outside their media targets like advertisers do in other media, larger ad-supported publishers are instead competing furiously, with the end goal of adding scale to targeting options. The idea is to pile on the ad inventory, provided it can be tightly targeted, so that publishers can bring the highest number of the most qualified prospects to advertisers.
This begs the question: Are we in the middle of another land grab?
The largest ad-supported publishers out there seem to have beefed up their targeting platforms over the past several months. Now it's time to scale up, and there just happens to be a number of ad networks out there who have aggregated enough inventory and reach to give the Yahoos and AOLs of the world a run for their money. If you plan or buy media, you know many of these networks give presentations in which they benchmark their reach against that of the Big Four.
Now, I believe we're going to see differentiated ad networks commanding premiums in the marketplace. When I say "differentiated," I mean that they have access to unique, unduplicated inventory, or that they at least get the first or second ad impression on websites that farm their ad sales out to a handful of networks. Technology may play a role as well, but by and large the Big Four have their targeting options nailed down and they're out looking for additional scale.
Look for more ad network acquisitions in the near future.
Tom Hespos is the president of Underscore Marketing and blogs at Hespos.com. Read full bio.
