Wednesday, May 02, 2007

Fred Wilson on Online Advertising

Fred Wilson writes, following Yahoo's purchase of RightMedia:
Clearly the online ad market is hot, particularly the "display" side of the business. Both Right Media and Doubleclick are in the "infrastructure" part of the business. Doubleclick leads the market in ad serving, the most basic online ad function. And Right Media leads the market in the exchange side of the business, bring buyers and sellers together and providing transparency to everyone involved.

I think there is a lot more that can and will be done around exchanges. To date, Right Media has operated at the low end (remnant inventory) of the market. That's because the low end of the market benefits most from the efficiencies that come from an exchange. But over time I believe the entire online ad market will become exchange driven and everyone will benefit from that.

So I don't think these transactions mark the mature/consolidation phase at all. I think there's tremendous opportunity ahead in online advertising. But entrepreneurs and investors should learn the lessons of Doubleclick and Right Media. Build a dominant position in a valuable sector of the business and you'll be rewarded handsomely.

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