Cox Enterprises To Acquire Adify, An Ad Tech Firm

Cox Enterprises, a media company with broad holdings in newspapers, radio and television, said Tuesday that it would pay $300 million in cash for the advertising technology company Adify. The move would put Cox in competition with companies like Google that have built up big online advertising franchises.

Adify, founded in 2005, helps Internet publishers build vertical advertising networks. These are groupings of sites about specific content, like travel or business, where advertisers can buy space on all the sites simultaneously.

The acquisition will help Cox build vertical networks around its existing properties, said John Dyer, executive vice president for finance at Cox. For instance, the company could build a network for travel-related advertising around the Travel Channel’s Web site.

But the major appeal of Adify is that it helps other publishers build their own ad networks under their own brand names. “Vertical online ad networks are going to be a very important growth area,” said David Hallerman, senior analyst for eMarketer, a research firm.

Acquiring Adify will put Cox in direct competition with Google’s DoubleClick division. DoubleClick said in March that it would introduce a product to help publishers create vertical networks — which is precisely Adify’s business model — in the second half of this year.

Other publishing companies besides Cox have been trying to build online revenue through joining or building ad networks. BET Networks said in January that it had introduced a network focused on “urban and African-American consumers.” Forbes .com built one for finance blogs in March, and last November, Martha Stewart Living Omnimedia created a lifestyle network. Adify helped build the Forbes and Martha Stewart networks.

Cox is itself a member of advertising networks like Yahoo’s newspaper consortium and quadrantONE, a new venture started by the Tribune Company, the Gannett Company, the Hearst Corporation and The New York Times Company. Both these networks help Cox fill advertising space on the Web sites of its newspapers, like The Atlanta Journal-Constitution.

The sale puts Adify in a position where it will woo companies that compete with its new parent. Current clients — and Cox competitors — include the Washington Post Company, Time Warner and Reuters.

Cox said it was not worried about conflicts of interest. “We’ve managed that from newspapers to radio to TV to cable TV,” Mr. Dyer said. “There’s an intersection — one might call it a competition — between those businesses as far as advertisers are concerned, and we’ve done that for a whole lot of years and done that quite successfully.”

Russ Fradin, the chief executive of Adify, said the deal had come about when his company had been seeking its third round of venture-capital financing two or three months ago. (It had raised $8.25 million in its first round, and $19 million in its second round in 2007 from investors that included Time Warner Investments and NBC Universal.) Adify approached Cox about becoming a strategic investor, and Cox responded that it wanted more than that.

Mr. Hallerman of eMarketer called the deal “one of the few that we’ve seen where the newspaper industry has gone beyond its normal playing field.”

Adify, with about 80 employees, will remain based in San Bruno, Calif., and will be a stand-alone unit under Cox TMI, a Cox holding company. Mr. Fradin will stay on as Adify’s president.

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