Yahoo! Leads Investment in Ad Auction Company Right Media

rmx direct logoNew York based alternative advertising meta-network Right Media closed $45 million in Series B funding today. The service auctions ad space between multiple ad networks in real time. Yahoo! lead the round and will take 20% of the company. In June of 2005 Right Media received $7.25 million in funding from Redpoint Ventures. Redpoint was also a participant in this round.

We profiled Right Media in August when the company released a lightweight version of its advertising marketplace called RMX Direct.

Right Media’s system allows website publishers to participate in multiple ad networks and automatically display ads from whichever network will pay the highest price per impression for their ad space in real time bidding. The company says that more than 2 billion impressions are traded daily through its service. The service includes a filtering system to prevent malware distribution through ads and enforces publisher criteria. Publishers are able to exercise very granular control over what ads run on their sites.

Automated bidding includes factors like geographic location of each impression and conversion rates for the site and user (cookies). Bidding goes on in real time relative to predetermined campaigns – the enterprise version of Right Media currently runs 30,000 auctions per second.

In August Right Media had 50 ad networks participating in its enterprise edition and 8 in its version for small publishers. Critics questioned whether Right Media would be a useful service without major ad networks participating in their service, though that criticism could only be raised concerning the small publisher service. Right Media’s enterprise component has participants that include Fox Interactive, Tribune and Looksmart. Yahoo! clearly supports the model and will be auctioning non-premium ad space of its own through Right Media.

The timing is right for Yahoo! to do something in the ad space. The company’s stock plummeted and hasn’t recovered since slumping ad revenues from big auto and financial services ad buyers were publicly discussed mid September. More bad news came from Yahoo! today – a reported 38% drop in third quarter profits. Leveraging an auction system for non-premium ad space could help shore up some of the holes emerging in the company’s ad strategy. In addition to leveraging low traffic pages, a stake in Right Media could help strike a blow against click fraud. Real time bidding could respond rapidly to low conversion rates by dropping bids automatically.