Cox Enterprises to buy online ad company

Article Source: http://ajc.com
By MARK DAVIS
The Atlanta Journal-Constitution
Published on: 04/29/08

Adify Corp., a 3-year-old company that knits together many Web sites into large audiences that are attractive to advertisers, is being bought by Atlanta-based Cox Enterprises Inc. for $300 million.

Adify began as a startup idea by a trio of people sitting around a cabana in Silicon Valley, but it represents “the next step in advertising,” said John Dyer, Cox Enterprises’ executive vice president of finance. Cox announced the all-cash deal today.

The purchase means Cox properties will be better positioned to take advantage of a growing online marketplace, said Dyer. The company is buying Adify at a time of shrinking newspaper and television advertising revenues. The Atlanta Journal-Constitution is owned by Cox Enterprises.

“This gives us the opportunity to participate in the growth of online advertising,” Dyer said. “We think this will work.”

Adify, based in San Bruno, Calif., allows media companies to extend their advertising sales beyond their own Web sites, said Adify Chief Executive Russ Fradin. It identifies prospective Web sites with common subject matter — for instance, parenting or travel — and offers them as a package to advertisers wanting to reach their readers without having to buy ads from each site individually.

“If you’re a media company, you need to deliver advertising to a larger audience,” he said.

Fradin, one of Adify’s co-founders, likened the company’s business model to one created more than two decades ago when TV networks faced competition from cable channels. As cable fragmented their traditional audience, said Fradin, the networks responded by acquiring specialty networks to keep advertisers from fleeing.

The principle also is comparable for national magazines, which offer sales packages to regional advertisers, he said.

Adify debuted Oct. 31, 2005, and was based on a business model Fradin and two others developed on a whiteboard while sitting at a Silicon Valley cabana.

Adify quickly secured two clients and now has more than 130, he said. The company has about 80 employees.

The customer list includes entrepreneurs and established media outlets, such as Forbes, The Guardian, HotChalk, Houseblogs, Martha Stewart, NBC Universal, Reuters, Time Warner and Washington Post Co.

Adify started with $3 million in investments, said Fradin. In less than two years, it had added nearly $24 million from investors confident the company would keep growing.

Then Cox offered it more than 10 times that amount to become part of a diversified company that owns the Journal-Constitution as well as other newspapers, television and radio stations, cable TV and high-speed Internet systems, and auto auctions.

Joining Cox, said Fradin, allows Adity to pay its investors. “They’re getting a good return on their money.”

It also means Adify doesn’t have to worry about raising more capital, he said.

The transaction should be complete in May, officials said. Cox plans to let Adify remain a stand-alone unit run by Fradin.