BlueLithium: Yahoo!'s Latest Addiction

No one can say that Yahoo! (Nasdaq: YHOO  ) is settling for organic solutions to beef up its online marketing presence. Just months after announcing its purchase of Right Media, Yahoo! is opening up its pocketbook again to spend $300 million for BlueLithium.

The move will help improve Yahoo!'s sluggish growth in its bread-and-butter Web advertising business. According to comScore Media Matrix, BlueLithium is the second-largest ad network in the United Kingdom -- and the fifth-largest domestically -- with 145 million unique monthly visitors.

Sure, the deal is small by recent standards. Google (Nasdaq: GOOG  ) is paying $3.1 billion for DoubleClick, while Microsoft (Nasdaq: MSFT  ) just closed on its $6 billion purchase of aQuantive. In a monetary sense, Yahoo! is only falling further behind by spending just shy of $1 billion for both Right Media and BlueLithium. At least one can argue that Yahoo! is taking baby steps in the right direction.

BlueLithium will naturally give Yahoo! a prolific nudge in the United Kingdom, where it's second only to Time Warner's (NYSE: TWX  ) Advertising.com. BlueLithium's ad network reaches about 80% of the U.K. audience.

However, it's not all analytical, behavioral-targeting work and no play at BlueLithium. Last year, it helped launch MingleNow.com, billed as the first "offline to online social network." MingleNow is a venue-driven platform, connecting people to actual bars, clubs, and restaurants.

For a company like Yahoo! that is getting high marks for its Web 2.0 initiatives like Flickr, del.icio.us, and Yahoo! Answers, BlueLithium's role as an incubator can't be ignored.

It may be another nickel-and-dime deal at a time when Yahoo!'s rivals are spending billions, but it's ultimately better for Yahoo! to acquire BlueLithium than to let someone else have it.

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