Yahoo previously bought 20% of the company in a $45 million Series B round of funding announced in October 2006. The company has raised over $50 million to date.

This move counters Google’s acquisition of DoubleClick earlier this month for $3.1 billion, and signals that Yahoo wants more weapons in its arsenal to fight the ongoing online advertising war beyond their new Panama release.

RightMedia runs an advertising marketplace that allows for much more efficient advertsing pricing than older negotiated models (something still in the planning stages at DoubleClick). See our coverage of their RMX Direct product from August 2005.

RightMedia also tends to work with large intermediate ad brokers and addresses the short tail of the ad market (as does DoubleClick), whereas Overture and Adsense are definitely long tail products with many smaller advertisers and publishers.

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We profiled Right Media in August when the company released a lightweight version of its advertising marketplace called RMX Direct.

Right Media’s system allows website publishers to participate in multiple ad networks and automatically display ads from whichever network will pay the highest price per impression for their ad space in real time bidding. The company says that more than 2 billion impressions are traded daily through its service. The service includes a filtering system to prevent malware distribution through ads and enforces publisher criteria. Publishers are able to exercise very granular control over what ads run on their sites.

Automated bidding includes factors like geographic location of each impression and conversion rates for the site and user (cookies). Bidding goes on in real time relative to predetermined campaigns – the enterprise version of Right Media currently runs 30,000 auctions per second.

In August Right Media had 50 ad networks participating in its enterprise edition and 8 in its version for small publishers. Critics questioned whether Right Media would be a useful service without major ad networks participating in their service, though that criticism could only be raised concerning the small publisher service. Right Media’s enterprise component has participants that include Fox Interactive, Tribune and Looksmart. Yahoo! clearly supports the model and will be auctioning non-premium ad space of its own through Right Media.

The timing is right for Yahoo! to do something in the ad space. The company’s stock plummeted and hasn’t recovered since slumping ad revenues from big auto and financial services ad buyers were publicly discussed mid September. More bad news came from Yahoo! today – a reported 38% drop in third quarter profits. Leveraging an auction system for non-premium ad space could help shore up some of the holes emerging in the company’s ad strategy. In addition to leveraging low traffic pages, a stake in Right Media could help strike a blow against click fraud. Real time bidding could respond rapidly to low conversion rates by dropping bids automatically.

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RMX Direct will officially launch in September but is opening up beta accounts now. RightMedia has offered a more complicated enterprise version of the system since April 2005. While the enterprise system has more than 50 participating ad networks to chose from, RMX Direct is starting out with only 8 but will increase in time.

Publishers who get paid well by AdSense are unlikely to gain a whole lot from RMX Direct, but many users are liable to find better payment through competing alternatives.

The most likely use scenario is for site publishers to tell the system what CPM they get paid by AdSense (not a participating network, so calculating from CPC if needed) and then join a number of other participating networks. In instances where another network would pay more than AdSense, then that network’s ads are displayed. The bidding includes factors like geographic location of each impression and conversion rates for the site and user (cookies). Bidding goes on in real time relative to predetermined campaigns – the enterprise version of Right Media currently runs 30,000 auctions per second.

Ad placement, size and other factors can be administered through the RMX Direct dashboard, publisher preferences can be set and a forum can be used to discuss and rate the various networks. It’s quite a straightforward system, given how complicated the options are and how early it is in development.

The MediaGuard system is particularly interesting. Ad based malware hit the headlines last month when thousands of computers were infected from ads served up on MySpace. RMX Direct runs all the ads from participating networks through an automated tool that tests each one for spyware, popups and ActiveX installs. RMX Direct won’t show any ad if it detects any of those. The ads then go through 2 human editors who tag them with terms like distracting, dating and sports.

Publishers can chose which categories to block. Ads can even be blocked on the basis of excessive punctuation, the presence of the word “Free,” sexual orientation or disability based attacks or religious content. Those are just a few of my favorite criteria on a long list. As you check off boxes to block ad types by tag, the percentage of available ads in the system changes in real time. It’s a fun system to use.

Future developments will include RSS reporting, blog platform plug ins so that reporting data can be viewed from your blog’s dashboard and more.

Looks like an interesting and innovative system that could work well for publishers seeking to leverage alternative ad networks.