Yahoo takes reins at Right Media

Yahoo Inc. took control of online advertising exchange Right Media Inc. on Thursday, giving the slumping internet portal a head start on rivals Google Inc. and Microsoft Corp. in a heated race to build more powerful marketing vehicles.

The Sunnyvale, Calif.-based company is counting on its nearly $700-million US acquisition of Right Media to help sell more internet ads that rely on graphics and other visuals a format expected to become increasingly popular as companies promote brands online instead of on television and in magazines and newspapers.

Google has relied largely on short, text-based messages to establish the internet's largest ad network so far.

Ad feeding frenzy

In anticipation of greater demand for more dynamic ads, Google and Microsoft are buying services that help distribute graphical advertising on the web.

Mountain View, Calif.-based Google has agreed to buy DoubleClick Inc. for $3.1 billion. Redmond, Wash.-based Microsoft plans to take over aQuantive Inc. for $6 billion.

Microsoft's deal is expected to close in about a month. But Google's deal has bogged down in a regulatory review that could drag on for several more months as the U.S. Federal Trade Commission examines whether the proposed DoubleClick deal would stifle competition in the rapidly growing online ad market.

The delay could help both Microsoft and Yahoo as they try to close the gap with the world's biggest search engine, said Tim Vanderhook, chief executive of online ad service Specific Media.

"I think they are very excited about theGoogle and DoubleClick deal being tied up because it gives them more time to try to catch up," Vanderhook said.

Yahoo trails Google

Yahoo's inability to keep pace with Google has hammered its stock price, which plummeted 31 per cent since late 2005. Once the smaller of the two companies, Google makes more money in three months than Yahoo does in an entire year. Both companies release second-quarter results next week.

In an attempt to regain its stride, Yahoo last month named co-founder Jerry Yang to replace chairman Terry Semel as chief executive.

Yahoo acquired a 20 per cent stake in Right Media last October for a reported $40 million. The New York-based company runs a system that allows web publishers to auction advertising space to the highest bidder. Right Media typically collects a seven per cent commission.

Two weeks after Google agreed to buy DoubleClick in April, Yahoo announced it was buying the rest of Right Media for $680 million.

By the time the cash-and-stock deal closed, the final price for the remaining 80 per cent stake in Right Media had fallen to $650 million because of Yahoo's skidding stock.