Yahoo-Blue Lithium click on Web display ads

Yahoo agreed to buy advertising network Blue Lithium for $300 million this week, a deal that adds to a string of industry acquisitions and signals a growing new direction for online ads.

Blue Lithium, based in San Jose, Calif., specializes in selling performance-based display ads across a network of Web sites. Like search-related text ads, performance banners let advertisers pay for exposure to customers only when people respond to the ad, whether it's by agreeing to receive more information or by taking some action. The privately held company, which also sells behavioral targeted ads, is ranked the fifth largest ad network in the United States and second largest in the United Kingdom.

Todd Teresi, senior vice president of Yahoo's publisher network, said that the performance specialty is what attracted the media giant to Blue Lithium.

"Yahoo has been strong on the brand advertising side of the business, which is more about reach and frequency (for ads). Where we don't believe we've been as strong is the performance side, where the marketer is trying for some action, like a credit card signup for AmEx or a test drive for Toyota," said Teresi.

(Teresi said that Yahoo didn't have the tools to build that business thus far. Google already offers advertisers the ability to buy performance-based display ads.)

This week's deal compounds a buying spree in the ad market. The mother of all deals came in early April, when Google announced it would buy online ad giant DoubleClick for $3.1 billion. Later that month, Yahoo bought display ad exchange Right Media for about $680 million. Then in May, Microsoft said it would buy online ad and marketing specialist Aquantive for $6 billion. Not to be left out, AOL bought behavioral ad company Tacoda for an undisclosed sum this summer.

It seems there are no independent online ad companies left.

The deals highlight two continuing directions for online ads. One is that behavioral-ad targeting is taking wider hold at the big media companies, and the other is that companies like Yahoo will be focusing more on selling performance-based banner ads. Tim Hanlon, a senior vice president at Denuo, a consulting arm of the advertising agency Publicis Groupe, said those two trends will merge, given that behavioral targeting helps improve the odds of performance ads.

The Yahoo deal "is another step toward the inevitability to behavioral targeting as an essential component of online ads. Clearly performance is part of it," Hanlon said.