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Yahoo-Right Media: Execs Address Questions Of Conflicts, Value

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The midnight announcement that Yahoo is acquiring 80 percent of Right Media for $680 million was followed by a call Monday with Yahoo chairman and CEO Terry Semel, Sue Decker, the outgoing CFO who now heads the advertising and publisher group, and Right Media CEO Michael Walrath, explaining the deal to analysts and media. [Update: Semel also addressed the acquisition in a blog post.]

Some of the details:

Changing Valuation: Last fall, when Yahoo bought a 20 percent stake in Right Media for $40 million, Yahoo valued the company at $200 million. Now, at the time of the announcement, it was valued at $850 million. Asked what accounted for the change — did Right Media experience substantial growth since then or has the M&A environment tightened – Decker answered: “There are three considerations in the value that we saw. One is the value in the stand-alone business. That’s all that we considered when we were looking at it the $200 million valuation last fall, because we were only owning 20 percent and we couldn’t have the integration capabilities that we can have today.” Secondly, Yahoo now believes it can create a much more robust platform for its display publisher network from Right Media’s existing tools and experienced sales team. Yahoo also hopes to gain from opening up the ad network to all publishers. Decker: “We’re calling it the ‘we sell/you sell’ model, where we’re going to open this up to other publishers’ sales forces, who have a scarcity of premium inventory, and would like to sell more, potentially Yahoo inventory and exchange inventory. Those factors dramatically enhance the scale of the ad network.”

Yahoo Expects Price Lifts Of 50 Percent For Ad Inventory: Yahoo had previously moved a small portion of ad inventory over to Right Media to gauge possible returns. Decker: “We’ve seen price lifts on what we have moved of over 50 percent. Right Media has seen even higher percentages with other publishers. A good portion of our inventory is sold to resellers and other ad networks, and we believe that there is a meaningful price spread in the buy price from us and the sell price to the markets. We believe we can narrow that by creating a more efficient auction by bringing our two channels together. Also, there’s a lot we didn’t include, in terms of upsides, I talked about a combined roadmap, which could allow it to offer more formats, video, mobile, text

One Response to “Yahoo-Right Media: Execs Address Questions Of Conflicts, Value”

  1. I'm a little confused. Yahoo's saying that Right is worth $200 million as a business. But it's worth 3.5 times that if a company (like Yahoo) were to come along and, say, buy the company outright, which of course is exactly what Yahoo's doing.

    Is Yahoo stupid? Are they acting as buyer AND seller in this transaction?

    Do the Yahoo lawyers put an offer on the table, and then run around to Right Media's side and whisper in their ears, "No that offer's too low. We're totally going to make a lot of money off you guys. Make us go higher."

    If I were a Yahoo shareholder, I'd be kinda pissed.