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Sep. 5, 2007

Late yesterday, Yahoo has said it is acquiring online advertising network BlueLithium for $300 million in cash. With this acquisition, the company wants to build upon an expansion aimed at ending a financial problem that has severely damaged Yahoo's stock price.

This latest acquisition is Yahoo's attempt to regain some of the ground that it has already lost during the past three years to Google.

Recently, Yahoo has already invested almost $700 million to acquire the Right Media online ad exchange, and has upgraded its system for distributing ad links tied to search requests.

Overall, Yahoo is betting it will become a more compelling marketing vehicle by simply offering more options for Internet marketers and advertisers to better connect with consumers shopping for products on the Internet.

Apart from operating an ad network, BlueLithium provides tracking technology, known as behavioral targeting, that identifies Internet surfers with particular interests so that the ads they see will be more interesting to them.

As an example of how this works, a person who has been looking for information about home loans on the Web would be more likely to see ads about mortgages. Todd Teresi, senior v.p. of Yahoo's publisher network says "we think this is the next logical step in our evolution."

Teresi added that an impressive list of some important advertisers, such as General Motors already rely on BlueLithium.

For their part, Google and Microsoft are also trying to supplement their advertising services through some similar acquisitions. In August, Microsoft has completed a $6 billion takeover of aQuantive, while Google hopes to acquire DoubleClick for $3.1 billion, that is if it can gain approval of federal antitrust regulators.

Yahoo expects to complete its BlueLithium acquisition before the end of 2007.

BlueLithium is a private company, and it says it has turned to profitability three months after its foundation three years ago.

The company has about 135 employees located in ten offices in the U.S. and Europe.

In recent years, Yahoo has been severely trounced by Google. Yahoo's overall profitability dropped by almost seven percent to $303 million during the first half of 2007.

Meanwhile, Google's net profit earnings have increased a staggering 47 percent to $1.9 billion.

Such a large disparity has spooked Wall Street investors, contributing to a nearly 40 percent drop in Yahoo's stock price since two years ago.

Yahoo's shares increased $1.24 to finish yesterday's regular session at $23.97 before the BlueLithium deal was announced, then rose by another 15 cents a share in after-hours trading.

In June, the backlash prompted Yahoo Chairman Terry Semel to step down as chief executive and turn over the day-to-day management of Yahoo to company original co-founder Jerry Yang.

The advertising operations are being managed by Yahoo's former chief financial officer, Susan Decker, who already has reshuffled several key positions inside the company.

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Source: Yahoo News