Yahoo to Buy Ad Company BlueLithium for $300 Million

Bloomberg
by Ari Levy, September 4, 2007

Sept. 4 (Bloomberg) -- Yahoo! Inc., chasing Google Inc. in the online-advertising market, plans to buy BlueLithium for $300 million, acquiring the fifth-largest U.S. ad network.

BlueLithium, a closely held company based in San Jose, California, handles ads that draw 145 million visitors a month, Yahoo said today in a statement. BlueLithium also designs software that helps customers create targeted ads.

The acquisition marks the first major transaction for Yahoo since co-founder Jerry Yang returned as chief executive officer in June. Coupled with the purchase of Right Media Inc., completed last month, BlueLithium may help Yahoo bolster advertising revenue after three years of declining sales and market share losses to Google.

``We saw this as the next logical step,'' Todd Teresi, senior vice president at Sunnyvale, California-based Yahoo, said in an interview. The acquisition will help the company and its partners earn a ``greater return on their pages,'' he said.

BlueLithium has 135 employees in the U.S. and Europe, and has doubled in size each of the past three years, according to the company's Web site. Yahoo plans to keep all the employees and has yet to determine where they will be located, Teresi said.

Yahoo's share of U.S. Internet search queries fell to 23.5 percent in July from 29.8 percent a year ago, while Mountain View, California-based Google's share rose to 55.2 percent from 46.2 percent, according to Reston, Virginia-based ComScore Inc. Net sales at Google surged 63 percent in the second quarter, compared with Yahoo's 11 percent growth.

Yahoo rose $1.24, or 5.5 percent, to $23.97 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has fallen 6.1 percent this year.

Yahoo expects the cash deal to close in the fourth quarter. Evercore Partners served as BlueLithium's financial adviser.