As predicted in our July 24 post, the online advertising company consolidation continues. Last night, Yahoo!, on the heals of its $850 million payout for the Right Media advertising exchange, pocketed BlueLithium for $300 million.

Blue Lithium is one of the larger ad networks behind giants like Advertising.com and ValueClick and specializes in behavioral targeting for direct response advertisers across the remnant inventory of larger sites.

Word is the $300 million deal valued BlueLithium at 4-5 times revenue. That would put the company is a revenue range of $60-75 million, although alarm:clock reports 2006 revenue at $100 million. Back in April word was the company was on an IPO track.

It is refreshing to see Yahoo! take action to build network and exchange businesses, especially as portal ad buys continue to come under pricing and performance pressure from network and exchange businesses. CEO and Chairman Gurbaksh Chahal took the behavioral black box idea from Advertising.com, hired 120 people and created scale.

Themes we see in the Yahoo! – BlueLithium transaction and our take:

1. Behavioral targeting. (ContextWeb = Contextual)
Kara Swisher over at AllThingsD plays the paranoid, Orwellian, “everyone is watching you” card. ContextWeb’s ADSDAQ is contextual, not behavioral, but we agree with her final assessment that everyone is doing it (behavioral), so get in the game. What’s more interesting is how BlueLithium has focused on behavioral as a way to attract direct response advertisers while Tacoda (recently bought by AOL), perhaps because of its start as a technology company working with branded sites, has made its appeal to larger brand advertisers.

2. Remnant inventory and DR advertisers. (ContextWeb = Premium Inventory, Brand Advertisers)
This makes BlueLithium (or any other remnant network) a nice addition to the RightMedia remnant exchange. Still, in addition to solving its own business issues (improving monetization of unsold or remnant inventory—a stated goal by Yahoo! during its investor call announcing the RightMedia acquisition), Yahoo! and others now need to create “off-portal” opportunities for brand advertisers on premium inventory.

ContextWeb’s ADSDAQ has certainly been successful at solving this business issue (the need for “brand-safe”, premium inventory) facing advertisers and agencies—providing the reach and pricing typically found with an ad network along with the premium contextually targeted page inventory a brand advertiser typically sees from site specific and portal buys. As growth in display advertising dollars accelerates faster than search, as almost every Internet analyst is currently predicting, agencies and their brand advertising clients are primary drivers in creating increasing demand for premium, brand-safe inventory.

3. Large sites. (ContextWeb = Large and small, quality content sites)
Blue Lithium has 1,000 sites in its network with much of its inventory coming from the largest sites online. There is no doubt this is a great way to scale a business and pull in good inventory quickly. In the end, we don’t see how Microsoft, AOL or Yahoo! introduce a game changing formula without in part having a compelling offering to the one million web publishers who currently run Google’s Adsense program and have little or no alternate choice. We are waiting to see how Yahoo! makes attributes of RightMedia and BlueLithium available via its Yahoo! Publisher Network.

ContextWeb’s ADSDAQ answer is to compliment the larger publishers in our exchange by attracting quality, niche content sites via ADSDAQ’s self-serve Selling Desk.

Tags: adsdaq, contextweb, google, yahoo, rightmedia, adecn, microsoft

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