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Yahoo acquires video ad firm for $160 million

Times Staff Writer

Yahoo Inc. got back to business Tuesday, announcing its first acquisition since Microsoft Corp. made its unsolicited takeover bid for the Internet company.

Yahoo bought Maven Networks Inc. for about $160 million to expand its footprint in the fast-growing online video advertising market, one of the battlegrounds with Google Inc. and other rivals.

Maven, based in Cambridge, Mass., delivers video and ads for more than 30 media companies, including News Corp.'s Fox News, Sony Pictures and CBS Corp.'s CBS Sports.

The deal was announced one day after Yahoo rejected Microsoft’s $44.6-billion takeover bid and after Microsoft announced its own purchase of Danger Inc., a Palo Alto company that makes software for mobile handsets.

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“You have got to keep going with your business or you cripple yourself,” Sanford C. Bernstein & Co. analyst Charles Di Bona said.

Yahoo declined to say whether it paid in cash or stock.

Analysts are still betting that Microsoft will succeed in its quest to buy Yahoo but expect the corporate mating dance to last a few more weeks. They predict that Microsoft eventually will increase its $31-a-share offer.

Bill Miller, fund manager at Legg Mason Inc., the second-biggest shareholder in Yahoo, wrote in a letter released Tuesday that he believed Yahoo would have trouble coming up with alternatives that could outmatch what Microsoft would eventually pay for the company.

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Sunnyvale, Calif.-based Yahoo has aggressively expanded its online advertising network by buying firms including BlueLithium and Right Media Inc.

Research firm EMarketer Inc. expects online video to grow to $4.3 billion by 2011, from $775 million in 2007.

As more people watch news, television and other entertainment on the Web, major media companies have put online video among their top priorities, said Will Richmond, president of Broadband Directions.

Cheryl Kellond, Yahoo’s senior director of global ad product strategy, said, “Video is the fastest-growing segment of the online ad market. We expect it to constitute 20% of the online display advertising business in the next three years.”

Yahoo aims to boost advertising revenue and build deeper relationships with entertainment and media companies by offering better technology to deliver video programs and ads. Maven will operate as a Yahoo subsidiary.

“We are going to continue focusing on the same business we have been pursuing, but we are going to do it on steroids as part of the Yahoo family,” said Maven Chief Executive Hilmi Ozguc, who founded the 5-year-old company.

With its large Internet audience, relationships with media companies and advertisers and growing ad network, Yahoo jumped to the top of the list of potential acquirers, he said.

Maven raised about $30 million in funding from Prism Venture Partners, Accel Partners and General Catalyst Partners. The 70-employee company was early in the online video market, which has become increasingly crowded as funding flows to start-ups.

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“It’s a transaction that makes a lot of sense for both parties,” Richmond said. “It gives Yahoo a premier content-management publishing and advertising technology platform for broadband video -- something it can marry very easily to its large audience base, advertiser base and media partner base. It gives Maven access to a vast number of advertising and media relationships.”

In video advertising, as in Web search advertising, Yahoo is playing catch-up to Google.

In December, nearly 141 million U.S. Internet users watched more than 10 billion videos, according to research firm ComScore Inc. Google, which outmaneuvered Yahoo to buy video-sharing site YouTube in 2006, captured the largest audience, with 79 million viewers. In terms of the number of videos watched, Google had nearly a third of the market; Yahoo had 3.4%.

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jessica.guynn@latimes.com


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