What Yahoo's Right Media purchase is really about

Yahoo acquires Right Media and we hear about the democratization of online advertising, a few thinly-veiled Google barbs and some tough talk from the likes of Yahoo CEO Terry Semel and CFO Susan Decker.

I don't doubt that Right Media is of strategic importance to Yahoo, which spent $680 million to preempt an upcoming DoubleClick (soon to be Google's) ad network.

But there's more to this deal (Techmeme discussion) than this Semel quote:

"We're stating clearly that the power of many trumps the power of one," said Semel in a reference to Google.

That's the "we're the anti-Google" spin. Here's the reality:

• There's growth is in remnant display inventory. Premium inventory is what gets the attention--that big Yahoo home page promotion--but many pages are barely monetized. These online ads are throwaways going for pennies. And Citigroup analyst Mark Mahaney estimates that a third of Yahoo's display inventory is non-premium.
• Pennies matter at Yahoo's scale. If Right Media can monetize this inventory better just by a few cents it can make a big difference at Yahoo's scale. Decker said that some Right Media trials showed a 50 percent lift. That's the equivalent of going from 10 cents per 1,000 pages to 15 cents. Those nickels add up. The Right Media acquisition message was also tailored to Wall Street, which spent a good chunk of Yahoo's earnings call talking about page monetization.
• Right Media cuts out middlemen. Decker said something on the conference call that stuck out for me. She noted a "good portion of our ad inventory is sold to resellers." These resellers make money by playing the spreads. Electronic exchanges have a habit of squeezing middlemen--just ask the specialists on the floor of the New York Stock Exchange. Decker said Yahoo "can narrow that spread."
• Yahoo has about a year to take advantage of Google-DoubleClick world domination worries so it should strike now. The concerns about Google's market power are very real. Yahoo can use those worries to its advantage--hence the democracy, transparency and open standards chatter.

Yahoo's trick is to use the Google worries to gain share, but not to turn the anti-Google rhetoric into a strategy. It's really no different than the fear uncertainty and doubt (FUD) tossed out there in the rest of the tech industry. SAP used FUD to gain share on Oracle amid its acquisition spree. Dell pounced on HP during its Compaq acquisition. And both Dell and SAP worked the FUD angle, but it doesn't work forever. Yahoo's challenge: Be more than the anti-Google. Right Media may be a big step in that direction.