Yahoo, Microsoft, and AppNexus were fairly close to doing a huge deal together over the summer, but then Yahoo’s board replaced CEO Ross Levinsohn with Marissa Mayer.According to several sources, the plan under consideration was for Yahoo to take a large stake in New York ad-tech startup AppNexus, and then hand over its advertising inventory to AppNexus for optimization.
Yahoo and AppNexus were going to have to involve Microsoft in the deal because it owns a sizeable stake in AppNexus, something close to but under 30%.
Because of that stake, Microsoft has all kinds of deal rights with AppNexus. Microsoft is also AppNexus’s biggest client.
Yahoo and Microsoft are already close partners, thanks to a search advertising deal the companies signed in 2009.
AppNexus is a “real-time bidding platform.” It’s a place where ad buyers, ad sellers, and lots of middlemen like data providers and ad networks meet and move massive amounts of money and ad inventory.
The idea behind the Microsoft deal is that by putting all of its inventory on the AppNexus platform, Microsoft makes AppNexus the company much more valuable. So before agreeing to become a client, Microsoft takes equity in AppNexus to capture some of the value it creates.
The potential Yahoo deal had a similar logic behind it.
A source close to AppNexus tells us the company was not in discussions with either Microsoft or Yahoo about an outright sale or change in control.
“Microsoft has a relationship with AppNexus. There have been periodic discussions with each of the Yahoo executive teams about a similar arrangement with Yahoo,” says this source.
“The folks who were running Yahoo when Ross was in charge were favourably predisposed toward us. Had they continued to be the regime in charge there, there would have been a good possibility that we would have done some sort of deal together.”
This source says that AppNexus has been “up the hill” with almost all of Yahoo’s recent CEOs because it is “the only company today that powers a portal scale ad exchange.”
A source close to Yahoo confirms this view of the events, but cautions that some people at Yahoo were very opposed to the deal. This source says that Yahoo ad-tech exec Scott Burke in particular “was a big negative opponent of it.”
The reason: AppNexus CEO Brian O’Kelley. O’Kelley was the CTO of another ad tech company called Right Media, which Yahoo bought for several hundred million dollars a couple years ago.
“The folks in the tech area of Yahoo are no fans of Brian,” says the source close to Yahoo. “They think he’s a huckster because Right Media needed to be rebuilt.”
Burke, says this source, would prefer Yahoo buy a couple other ad-tech companies and combine them.