Reviewing Yahoo!’s Right Media Exchange -For The Win!

The Crystal BallAfter IDC issued its recent estimate that Yahoo! has been surpassed in display ad supremacy by Google in Q4 2010, it feels like a great time to take out the “crystal ball” and offer a few future strategic scenarios for Yahoo! and its Right Media Exchange (RMX).

You’re welcome!

I admit that some of the thinking here echoes themes from my last pseudo-prognostication about RMX.

Scenario 1: Status quo. The company remains skeptical of real-time bidding as a solution to bring to its own inventory let alone that of the exchange as concerns around leakage (ewww), channel conflict, commodotization of inventory, etc. persist.

Scenario 2: Right Media Exchange becomes a sell-side platform (SSP). Yahoo! could partner with other big publisher players (utilizing their brand new 5:1 salesforce) like Aol, Turner and Viacom, and RMX could become a clearinghouse for big brand media companies and set higher price floors in an effort to continually automate part – only a part – of any big media companies direct sales team. High performing inventory like Yahoo! Mail will be there as will top brand publishers which should attract brand advertisers. The merging of ad strategies by big content players will likely influence Google as it considers its content strategy going forward. In fact, as certain functions in the ad tech ecosystem become commoditized, content becomes sexy tech and Google could own its own media company, for example.

Scenario 3: Another possibility to go along with the move to the SSP, is Right Media Exchange is turned off and Yahoo! buys again. The innovation in the space – with real-time bidding (RTB) among other features – may currently exceed RMXs sell-side capabilities as Yahoo! could make an acquisition of newer tech.

Scenario 4: Or, Microsoft adds display to its search partnership with Yahoo! and takes over the technology for at least part of Yahoo!’s remnant display strategy. This would mean that someday Yahoo! non-guaranteed inventory suddenly appears “for sale” with Brian O’Kelley and many from the former RMX team at AppNexus as Microsoft and Yahoo! inventory are merged under one exchange or SSP or whatever they’re calling it. Yahoo! would continue to concentrate on content and enable premium revenue opportunities in a more automated way.

Scenario 5: Right Media Exchange is turned off completely, Yahoo! takes a write-off and the company goes “Walker Jacobs.” RTB and ad networks be damned. It’s “Content” and direct sales FTW!

By John Ebbert

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  1. Or Scenario 6: Yahoo decides to directly compete with the technological innovation that Google has unleashed on the market and create their own next generation ad stack. Google has built or bought an exchange, DSP, dynamic creative company, ad network, publisher and advertiser ad server, web analytics and SEM toolset to create a pretty formidable stack of advertising technology. If Yahoo chose to compete and roll out their own stack they would rightfully need to put RMX at the center as Google has done with AdX.

  2. Frozon purple blood

    Very less likely Yahoo! will execute that technological innovation. I mean they can try but won’t be successful. AMP is taking forever to launch and RMX stopped innovating after acquired by Y! Y! was once a great tech company but they changed their direction to be a giant media with technology. Can’t stay top of the Ad tech world unless you’re devoted to that.

  3. Tim Avila

    Of all the potential scenarios, #1 seems most likely with possibly some enhanced RTB features that provide publishers some degree of transparency and control.

  4. Tim, Yahoo has to know that choice one is just a slow boil as Google remakes the display market around efficiency, scale, and technology. Yahoo can’t help but see that they need to innovate or die a slow death in display.

    Frozen, I haven’t given up hope yet. There are lots of smart people at Yahoo, it is the strategy that has been preventing them from effectively competing with all the new innovation in our space.

  5. Dataguy81

    Why should Yahoo cave to RTB pressure when sending users, URLs, etc in the bid request when it is not necessarily in their best interest? The only other publisher I can even remotely compare to yahoo is AOL and they’re not opening their inventory up to the DSPs and ad networks in an RTB fashion. What is good for the intermediaries are not necessarily good for Yahoo. I am not saying Yahoo shouldn’t be investing in the controls to at least test RTB on their O&O, but it’s not black or white.

  6. One way or another Yahoo is going to have to deal with the fact that advertisers who buy across the millions of sites that the audience is fragmented across simply refuse to deal with the inefficiency of point publishers any more. The internet inherently fragments content, audiences and advertising impressions in such a way that it doesn’t work to buy from individual publishers any more, not matter how big they are. With RTB advertisers finally have a way to unify their buys and bring efficiency, effectiveness and scale to their advertising campaigns. Yahoo can either realize this or fight for an antiquated model. The problem with your question Dataguy is that at the moment Yahoo is getting killed. It really doesn’t matter if RTB is in the interest of their current configuration, it is in the best interest of the advertisers who pay the bills and the customer always wins. Yahoo can either adapt and innovate or die a slow and bitter death as advertisers move away to more effective solutions.

    • Dataguy81

      Zach……There is no other publisher out there that I am aware of with a $1 billion Guaranteed ad business. RTB poses a great deal of risk and if Yahoo were to go all in and put their client relationships in the hands of the intermediaries, this puts a great deal of downward pressure on their GD pricing (I don’t buy the whole $50 RTB CPM mantra). Believe it or not, advertisers still want yahoo and will pay a premium for premium placement, ad format and the actual human customer service.

      As far as Yahoo getting killed, last I checked their display business was doing quite well and yield was increasing (according to numerous releases). Yahoo has other problems posed by shrinking search market share/revenues and losing engagement to social. But as far as their display strategy, I am not arguing that they could not innovate quicker and smarter, but RTB does not work for everyone (yet).

      • If Yahoo is doing so great these days then I guess there is nothing to talk about. My bad…