NEWS: Cox's Creative Ad Buy

TECHNOLOGY April 30, 2008

Cox's Creative Ad Buy

With its purchase of Adify, the media conglomerate hopes to fend off giants of online advertising Google, Yahoo!, Microsoft, and AOL

by Catherine Holahan

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Media conglomerate Cox Enterprises is taking a page from the playbook of the Internet companies threatening to grab part of its business. Atlanta-based Cox announced plans on Apr. 29 to pay $300 million for Adify, a company that specializes in online advertising.

Cox is trying to get a bigger slice of a market that's growing at the expense of its traditional businesses: newspapers, radio, and cable television. Research firm eMarketerexpects advertisers to spend roughly $29 billion this year on the Web, about 23% more than last year. Meanwhile, research firms project radio revenue will slip more than 3% this year. They also expect more declines for print publications. Newspaper revenue fell 9.4% in 2007, according to the Newspaper Association of America.

LONG TENTACLES

Traditional media companies have tried to benefit from the rush to advertise online by putting their content on the Web. Yet the biggest beneficiaries of the online ad boom have been four Internet companies, Google (GOOG), Yahoo! (YHOO), Microsoft (MSFT), and Time Warner's (TWX) AOL, which together grabbed more than two-thirds of the $21 billion spent online last year, according to eMarketer. The rest was divided among social networks, blogs, and other media companies.

The reason for the advertising prowess of the Big Four? Size, mainly. Their online audiences number in the hundreds of millions a month. Yahoo, the largest site, has more than 1 billion users on its U.S. site each month. The Internet companies also benefit because they've built large networks of Web sites that enable them to place ads on myriad sites in addition to their own pages. AOL's Platform A advertising network, for instance, reaches 91% of the U.S. population. Yahoo's and Google's networks (BusinessWeek.com, 4/14/08) reach more than 80% apiece.

Google and its Internet peers are likely to widen their influence as they integrate a string of online ad firm acquisitions. Last year, Google, Yahoo, Microsoft, and AOL spent more than $10 billion buying ad firms such as DoubleClick and aQuantive. The acquisitions not only enlarge already big ad networks but they also provide technology that helps advertisers identify and tailor ads for specific, coveted groups.

JOINING FORCES

With the acquisition of Adify, Cox is hoping to increase its share of the online advertising market. Rather than simply increasing the number of sites on which Cox can sell and serve ads, Adify provides Cox with the technology to let other media companies develop their own networks of sites, targeting similar audiences. It then takes a cut—between 12% and 20%—of the ad dollars made by the networks, depending on such variables as the size of the media property and the number of ads placed. The company already runs 108 networks, including one begun by Martha Stewart Living Omnimedia (MSO). "Many of them are taking off," says Russ Fradin, Adify's president and co-founder.

Media companies are increasingly banding together in such networks in hopes of generating the kind of audience size, in their specific categories, needed to attract online advertisers accustomed to Google's scale and targeting. In February the nation's largest newspaper owners—Gannett (GCI), Hearst, New York Times Co.(NYT), and Tribune Co. —formed an advertising consortium for their regional online publications (BusinessWeek.com, 2/25/08) to deliver national advertisers local audiences. Business magazine publisher Forbes has built an ad network using Adify's technology. "The network strategy shows that you don't have to keep trying to get bigger and more bloated [individually]," says Jarvis Coffin, CEO and founder of BurstMedia (BRST), an ad network for specialty Web sites. "You can get more people by joining a network."

The network strategy isn't the only option for trying to meet advertiser demands for large numbers of like-minded people. In April, Yahoo previewed an online advertising platform, called AMP! (BusinessWeek.com, 4/08/08), that lets big media publications purchase inventory on sites that match their audience demographics and sell it back to their advertisers. So, for example, an aviation publication could purchase ad space on a site that shows airplane photos, increasing the amount of aviation-related space it could offer to a brand such as Boeing (BA). "There are a couple ways to skin the cat," says Joe Apprendi, CEO of ad networkCollective Media.

Ed: Legacy Business Week at the tail end of a long, on-going conversation.

NEWS: Ad Platform Adify Sold To Cox Enterprises For $300 Million
By Editor(Editor) 

Adify, whose software helps companies build their own advertising networks, has been acquired by media company Cox Enterprises for $300 million,according to Silicon Alley Insider and others. The San Bruno, Calif. startup had raised ... New Economics of Advertising - http://adecon101.blogspot.com/