Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

News Analysis: Cox Acquires Adify For $300m Cash - Will Others Follow?

Posted by Tom Foremski - April 29, 2008

Recently I had been writing about the business opportunities for media companies acquiring advertising networks and advertising networks acquiring media companies. We are starting to see this happen. Please see: The future battle between ad networks and publishers

Today Cox Enterprises announced it had acquired Adify, a leading ad network, for $300 million in cash. I spoke with Joelle Kaufman, VP of marketing at Adify, and Rodney Mayers assistant VP of interactive media at Cox.

Mr Mayers characterized the acquisition as being strategic to Cox and that Adify would continue to operate as an independent company. Cox would not receive any special treatment from Adify, such as favorable split in advertising revenues.

"Cox has a long history of nurturing companies and enabling them to grow. Plus Cox brings to Adify a knowledge of the advertising industry which will be beneficial to Adify," Mr Mayers said.

Will Adify's business suffer because its current customers might be discouraged by a large media owner? Ms Kaufman said that Adify had spoken with all of its customers and that they saw no problem with the acquisition. She said that some had said that if it were a media company other than Cox, they would have a problem with the deal.

Foremski's Take:

This is a very good acquisition for Cox because Adify has an excellent technology and console for publishers and advertisers that enables complex advertising placement. I don't know of any other company that has a competitive technology of this type.

Cox could help move Adify into radio and TV advertising placement, which is where Google is moving. Adify has a much better console than Google's ad network and with Cox behind it, it can scale more quickly and potentially become a competitor to Google in key markets.

However, Adify may find it more difficult to acquire new customers because there will be a natural concern about the Cox connection. Adify knows a lot about its clients such as: how much ad revenue they are making and how well those businesses are performing. This is valuable competitive intelligence and Adify will likely have trouble convincing clients that this data is kept confidential, even if it is.

Cox said it is a strategic investment. This implies that Cox sees value in terms of its overall business--which means it provides it with a competitive advantage. Mr Mayers also said that Cox brings expertise to Adify in terms of its understanding of the advertising business. This doesn't describe an independent company, imho. Which will mean that potential Adify customers will think twice and thrice before committing to Adify.

Cox can more than makeup for any loss of business because of its large media holdings but there is a clear question mark on long term growth because of the ownership. This will spur other startups to create a similar technology to that of Adify.

If a coalition of media companies had invested in Adify, that would have helped it scale even faster, and helped it become a potentially stronger competitor to Google and other large advertising networks.

Right now there are few ad networks left that have not already been acquired by Google, Yahoo or Microsoft. Cox is showing that this is a media industry and that GOOG, YHOO, MSFT are competing in the media industry. These are technology-enabled media business groups and not technology groups. It is an important distinction.

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Please See:

Adify Blog:

As Adify began raising our third round of financing to fund our expansion, Cox Enterprises, based in Atlanta, expressed interest in acquiring us. Although Adify was not seeking an acquirer, Cox’s history, resources, and people demonstrated that it would be a very compatible business partner and the perfect home for our company. Cox is a 100+ year old diversified media company with a long history of investing in new media businesses, serving the advertising community and, above all else, a company-wide dedication to customer service. Their known reputation for superior service all starts with a deep commitment to investing in their employees. Operating Adify independently within Cox will enable us to continue building Adify by giving our company considerable new resources to deliver superior value to our customers and to compete in the online advertising marketplace.

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