Right Media's Big Ambitions

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Wary Customers

To succeed, Right Media needs to convince resistant publishers and advertisers that display ads could be a commodity traded like a stock. For some, this would be a hard sell. Big publishers and advertisers may prefer selling ads and space through staff members' existing relationships. After all, it's through those relationships that they negotiate deals unavailable to the market at large.

Second, many advertisers prefer working with a smaller network of trusted companies. Dave Morgan, founder and co-chairman of behavioral targeting advertising network Tacoda, knows this well. Morgan says advertisers often only want to bid on sites that have brands they feel will lend positive associations to their products. They don't want to appear on user-generated sites or branded sites without known content, he says.

Publishers have the same reservations. They want to sell their space only to buyers that can promise an ad won't offend a site's audience. "Traditional media has a pretty significant process to vet advertising. Condé Nast isn't going to put just any ad in their book," says Morgan. "It's the same thing on the Web."

Code Sweeper

Right Media has tools that let publishers see the ad content that would go on a site, refuse certain ads or companies, and set the "rating" of allowed ads. For example, a publication could say it only wants family-appropriate ads. And advertisers can choose, down to a pretty detailed level, what sites they bid on.

However, the system isn't perfect. In the past, Right Media and other ad networks had clients that slipped spyware into ads after the original spyware-free ad had been approved. In August, the company launched a Media Guard program to better detect when unauthorized changes were made to ads and ensure ads were clean of covert coding.

Despite reasons for resistance, many think the advertising market will eventually move to an open exchange. "A day will come when we truly have a transparent marketplace," says CIBC's Keung. "The hard question is when."

Other ad networks are also vying to be the one-stop shop where users exchange display ads and online real estate. ValueClick (VCLK), one of the largest ad networks, has ad-serving tools and a network of sites offering display advertising spots that it says reaches more than two-thirds of all U.S. Internet users (see BusinessWeek.com, 11/2/06, "ValueClick Vaults Higher").

Primary Threat

AdECN may pose an even larger threat. Like Right Media, the company is an auction-based exchange for online display advertising that allows users to bid on a cost-per-impression, per-click, and per-action basis. The company, based in California, announced a partnership with 10 online ad networks in Britain last month.

The biggest challenge, however, may come from the tech titans. This month, eBay (EBAY) began testing an ad-auction service that will allow bidding on television spots via the Internet. If it takes off, eBay might decide to expand its ad-auction reach elsewhere.

Similarly, Google could take its ad-auction platform for search results and step more aggressively into nonpremium display territory, leveraging the information it has about users and the Web to add value for advertisers. Walrath certainly sees the Google threat. "They're definitely No. 1 when we think of who our long-term competitor is," he says.

Right Media thinks it can scale those obstacles. If it does, Walrath could see Right Media serving as the exchange for other forms of advertising, such as print, radio, and television ads. However, that's all blue-sky stuff at the moment. First, Right Media has to attract more of the big online ad sellers and buyers to its network—and keep showing the growth that warrants knocking down office walls.

Holahan is a writer for BusinessWeek.com in New York .