As strange as it might sound, cable company Cox Enterprises is acquiring Adify, according to the Washington Post (although it wouldn’t be so strange if the acquirer was actually parent company Cox Enterprises, which owns various media properties including Cox Communications).
The deal would make it a ten-bagger for investors Venrock, US Venture Partners, NBC’s Peacock Equity fund, and Time Warner, who put in a total of $27 million over the past two years. This will be the second Internet advertising startup founders Larry Braitman and Richard Thompson sold for big bucks. The first one was Flycast Communications, which CMGI (remember them?) bought in 1999 for $2.3 billion, after it went public.
Adify is an ad network platform for niche publishers that lets advertisers and publishers contact each other and negotiate directly for ad space. It also lets Websites reject advertisers, and lets large publishers such as the Washington Post create their own ad networks. Comscore doesn’t even rank it among the top 50 ad networks.
So what would Cox, a cable company, want with it? Well, ad networks are still kinda hot, and there is always the greater fool theory. Or maybe they like the technology, and want to apply it to targeted TV ads through Project Canoe. No official word yet from either company.
Update: As Adify CEO Russ Fradin points out below, Adify is better described as a platform and services company, not a network.
Update 2: We’ve confirmed that the purchase was actually made by Cox Enterprises, not Cox Communications. And the price was indeed $300M, with significant upside for employees. Adify will continue to operate as an independent company with management staying onboard. Cox appears to have acquired Adify for its growth potential and the possible synergies it has with other in-house properties such as the Travel Channel and AutoTrader. There’s no plan to branch out into TV ads, and therefore no Project Canoe connection to speak of. It would be incorrect to describe Adify as an ad network since it actually provides the technology and back office services required for other companies to run their own vertical ad networks (180 total so far).
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They were purchased by Cox Enterprises, not communications. Cox Enterprises is larger than Viacom, Time Warner, and Disney. They own TV, Radio, Newspapers, Autotrader, Travel Channel, ValPak, and so on and so on.
They are a good fit since Adify could power all their online media, including Cox Communications as a sub of Cox Enterprises.
Adify is not an ad network per se. Adify is a platform and services company built for entrepreneurs, startups and media companies looking to build and run their own online advertising networks. 100+ ad networks run on Adify’s technology platform and use Adify’s back-office services today. As a platform we have no reason to show up in comScore’s ad network ranking report - our customers would look to be rated by comScore.
Russ
CEO, Adify
That letter above was extremely salesy - come on… Seriously, this is Techcrunch. Adify is a great solution for Cox Comm. but i’m trying to figure out as well why they chose them above all the others - are the CEO / upper management friends with the upper management of Adify?
Or is there a bigger solution other than banner ads such a capability for behavioral targeting?
Adify is a complete POS, a bunch of sales people who obviously duped another old media fool.
Miles -
What does “seriously, this is Techcrunch” mean? Please let us know the rules of commenting on a blog that (like others) often gets facts wrong as they tend to post before doing an extensive amount of research. (btw I love Techcrunch). I found the comment to be informative.
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Great sale, and price is certainly right… congratulations!
Russ this is great and thanks for the clarification. Congrats! Now please share your revenues. Thanks!
@2Web - be nice. Don’t hate the playa….
Adify owns the market in one of the fastest markets online today, and probably sold for way below where they could have been even 6 months from now. Not a great choice by Adify management from my perspective.
@BigVC - i was thinking the same thing. Glam was valued at $500 Million and Adify much less? Makes no sense.
Sorry guys, you could have raked in the big from GOOG or MSFT.
Despite Cox’s appearance, it is actually a pretty progressive “old” media company. This acquisition makes sense on a couple of levels. If you’re a TV company with stakes in TV advertising on two fronts (both cable and broadcast sales), then you’ve come to the conclusion that the pie you’re eating out of is getting smaller, not larger. The next step? Find the best internet ad platform for the money, put your content around it, spread the technology around the organization, and you’ll have a shot at being in business in 20 years.
Cox is a good fit for Adify, because they are good people. (I say this as someone who has worked with them on a consulting level for quite awhile.) Cox treats their employees well, builds forward looking, strong businesses, and will allow Adify to continue to thrive. Besides, Cox is privately held. It gives Adify access to more resources without having to deal with the pressures of Wall Street.
BigVC & NightRider
Remember “Time Value of Money” in grad school. A dollar today is worth than a dollar tomorrow. 10X return is nice by any ones scorecard.
But, I still want to know what revenues were for Adify
Yes I also want to know the revenue. Also remember that 27 million is the vc investment and vc never owns 100% so chances are last vc investment had valuation of at least 100 million if not more for the company so the exit was 2x or 3x for last round investor…
So anybody revenue, profits, vc valuation, etc..? : )))
@Russ Fraden - Is openx your only independent competitor left?
Now that the AP story is out I am happy to comment more openly.
smcnally -
We don’t really consider OpenX a competitor as their focus is really on providing site-side ad serving tools. We do not really focus on that part of the business, instead we focus on enabling aggregators to build and run premium quality vertical networks. Also our focus on back-office outsourcing as well as technology makes us different from everyone else in the space.
(sorry if that was too sales-y, just trying to answer the question)
BigVC / NightRider -
Thanks for the support on valuation. Glam is certainly a great company and we wish them all the luck in the world. They have also been around 6.5 years and Adify is 2 years old. Also, I would point out that M&A valuations are far different from fund-raising valuations.
We certainly belive the deal with Cox provides great value to our investors and employees while also providing significant upside for the team going forward.
Russ
Russ,
Congratulations on the sale and new growth prospects.
Rajeev Goel
PubMatic
This is great news and will help my business and I in the Caribbean who’ve launched Caribclix.com using the Adify platform last October to further legitimise the business and ramp up traction in our neck of the woods. Ahhh there is even more hope for the Caribbean Web.
Erick,
When calculating the return to investors, you can’t simply take the sale price of the company and divide by the investment to conclude that the investors made 10x their investment (a “ten-bagger” in Peter Lynch terms). You need to know what average valuation they invested at to understand the return on their investment (absent any additional participation clauses).
As an extreme example, if they had invested their $27 million into the company at a $300 million post valuation, and the company was then sold for $300 million, then they would have simply gotten their money back in the sale.
This may be a stupid question but how does Adify’s business model work? Do they collect a % of the publisher’s revenue? What percent? How do they audit how much revenue each publisher is getting to ensure they collect the amount owed to them? Any answers much appreciated. Thanks!