The Right Media Mastermind

Yahoo Recently Paid Michael Walrath $850M for His Firm. Not Bad for a Guy Who Never Imagined He'd Be an Entrepreneur

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NEW YORK ( -- It's a simple idea, really: Nonpremium ad inventory can be worth more by increasing the odds buyer and seller find each other in an open, real-time market. It's one that made Michael Walrath's Right Media worth more than $850 million to Yahoo, which recently acquired the 80% share of the company it didn't already own (Yahoo spent $40 million on a 20% stake last year).
Michael Walrath
Michael Walrath Credit: Darryl Estrine

Unlike most other young millionaires making fortunes off the space where Silicon Valley meets Madison Avenue, Mr. Walrath never dreamed of being an entrepreneur. He recently spoke to Ad Age about the vision of the exchange, its applicability to offline media and whether rapidly rising escalations indicate a second internet bubble.

Ad Age: What were your early years in the business like and how did it ready you to launch Right Media?

Michael Walrath: DoubleClick was my first industry gig. I was working at New York Sports Clubs in fitness-program management -- kind of a non sequitur, right? When DoubleClick was hiring like crazy in 1999 they hired a few people out of NYSC, and it had a network effect. ... I was there from the peak to the very bottom. It was a great time for me. Part of that was being on the direct-response side of the business. As the market fell apart, the direct-response advertisers were opportunistic. The group that I worked with actually grew. [But] when I joined stock was at $140 and I figured it would keep going up 10 points a day. Once it became clear I wasn't going to be able to rely on becoming an internet millionaire through stock options, I focused on what could I learn and it was a good environment for that. Stuff was falling by the wayside as the company reorganized and cut headcounts; I was able to pick up things that were falling by the wayside. It was business school for me.

Ad Age: What indicated to you there was a real business to be built in this online ad-exchange idea?

Mr. Walrath: We started Right Media as a consultancy. I hired a few guys I'd worked with and focused on helping buyers' and sellers' buying and selling through best practices and sometimes we'd just do it for them, place the buys and optimize for efficiency. But that didn't scale well, and we had to build tools and technologies to make it work better for advertisers and publishers. At some time along those two years it evolved into the exchange platform we launched a few years ago.

Ad Age: Have you always wanted to be an entrepreneur?

Mr. Walrath: No. It was an accident. I was supposed to be an English teacher. I come from a long line of teaching professionals. My father is a social worker at a city public school.

Ad Age: Online ad exchanges are generally likened to the stock market, where buyers and sellers use different brokerage firms but all trade in a central and transparent real-time market. In a media exchange, sellers put inventory into the exchange, which is often bought up by another site or publisher that needs the impressions to fulfill an advertiser request. Do you liken your exchange to Wall Street's?

Mr. Walrath: It's loosely modeled on the stock market. Some companies [trying to do exchanges] are talking about really modeling it after Nasdaq. They're focusing on trying to replicate that and the ad market doesn't work like securities. There's perishability in the ad market. You have a trade every time a user goes to a page in the ad market and that impression goes up for auction.

Ad Age: Do you envision the exchange model making the transition to offline media?

Mr. Walrath: It'll happen. Just like in online a couple years ago, everybody thought we were crazy and said this is never going to fly. A lot of that was around this idea that you're never going to get the publishers to sell their premium inventory. We said that might be true, but there's a lot of this nonpremium inventory out there that publishers are looking to monetize. There are some parallels to the world of TV and radio and other traditional media. You're not going to see an auction for "American Idol" or "CSI," but for late-night TV and the stuff that gets sold on direct-response basis, I can certainly envision a more efficient automated marketplace for that stuff.

Ad Age: And might it be Right Media that makes that transition happen?

Mr. Walrath: Right now the focus remains on continuing to grow Right Media exchange as a business unit inside Yahoo, because I'm personally committed to being there. I'm excited for what the market holds for us, about the value we'll create over the coming years, bringing openness to a market that hasn't necessarily had enough of it. ... When I set out to do this four years ago, it was about making it work better for buyer, seller and network -- whoever's involved in the transaction. But even at our current volume we're still a pretty small piece of [the] overall online-ad buy. What we'll see over the next couple years is the ability to drive efficiency and transparency into the rest of the market. That's what it's been about for us here, accomplishing the mission. This [acquisition] is not an outcome, but a validation it's time for us do this on a much bigger scale.

Ad Age: Right Media's valuation clearly soared in the past few months; meanwhile, it seems there are a number of other exchanges emerging. Why all the attention on this kind of business right now?

Mr. Walrath: Having a focus of monetizing nonpremium inventory is a lot less scary than it was a year or two ago. There's been a lot more of that inventory created and we've proven that your premium business doesn't fall apart when you focus on non-premium inventory -- they're two different products. The other factor is the market has become so fragmented for display advertising. There are so many options for media buyers and intermediaries that it gets very complex to manage buying and selling operations. There are specialty networks, scale networks, and buyers and sellers need ways to manage this diversity. The exchange provides a nice way to centralize and manage your buying and diversity.

Ad Age: Now that you're owned by one of the web's biggest publishers, other publisher clients may have concerns about staying neutral. How are you addressing that?

Mr. Walrath: We do need to remain neutral and we need to be organized in a way that reflects that. We need to continue to provide the transparency that proves our continued neutrality. There's a commitment on both parts to be an open ecosystem.

Ad Age: Do you think there's an internet bubble?

Mr. Walrath: I don't think it's a bubble. I understand people have trouble understanding [the prices of] this deal or the DoubleClick one [with Google for $3.1 billion]. I don't feel the need to justify that. This is a huge market and one of the fastest-growing segments of the market. While I recognize some people might not understand the value, I'm biased and think it's an incredibly smart deal for Yahoo and Right Media and our customers.

Ad Age: When you're not growing Right Media where do you log your leisure hours?

Mr. Walrath: I can't remember! [Laughs] I've got a 6-, 4- and 2-year-old. So I hang with the kids [at home on Long Island]. That doesn't change a lot. At work I'll be focused on finishing what we started, and the rest of my time is family time.
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