Walter Knapp

Exclusive: Federated Media sells off 'direct sales' biz

January 27, 2014: 10:59 PM ET

John Battelle's Federated Media is selling off its original business.

Federated-Media-LogoFORTUNE -- Ad network Federated Media Publishing has struck a deal to sell off its legacy direct sales business, Fortune has learned. The deal could be announced as early as tomorrow.

No word yet on the price or buyer. Blog network Say Media was rumored to have had interest, but a source says that it did not cross the finish line.

John Battelle started Federated Media almost a decade ago as one of the web's first ad networks. The San Francisco-based company raised $57.5 million in venture backing from investors including Omidyar Network, Oak Investment Partners, and The New York Times Co. (NYT).

Federated accumulated more than 150,000 blogs in its network, reaching 193 million monthly uniques as of January 2013. The company aggregated those audiences to sell premium banner ads directly to advertisers. In 2011, the company had 179 employees and expected revenue of $100 million.

In more recent years, however, Federated's core business has struggled. Premium sales from ad networks, which require a human to facilitate, have lost ground to algorithm-driven programmatic ads sold on exchanges. Federated unsuccessfully shopped itself to buyers including Walt Disney Co. (DIS) and AOL/Huffington Post (AOL), a source said.

MORE: Don't judge Kleiner Perkins by its crackpot co-founder

In November 2012, Federated laid off 24 employees in its core business and shifted its focus toward native ads with videos and embeddable photo galleries. In February 2013, Battelle returned to the company to replace CEO Deanna Brown.

Despite struggles with Federated's core business, the company's newer programmatic advertising division has flourished. Federated got into programmatic buying in 2011 when it paid just under $100 million Lijit Networks, a Boulder, Colo.-based adtech company that had raised $27.3 million in venture backing. Lijit's fast-growing platform has been a bright spot for the company, accounting for 40% of Federated Media's total revenue just a year after it was acquired.

As of tomorrow, Lijit will be all that remains of the company. Proceeds from the sale of Federated's legacy assets are expected to let the company -- which will likely get a new name -- double down on programmatic buying.

Federated has not yet responded to a request for comment by press time.

Update: Federated has officially announced the sale to LIN Digital Media, a subsidiary of publicly traded company LIN Media. The deal value was not disclosed. The Lijit assets have been renamed sovrn Holdings and the company will have its headquarters in Boulder. Walter Knapp, who was COO of Federated Media and Lijit, will be CEO of the new entity with Battelle acting as Executive Chairman.

Dan Primack contributed to the reporting of this story.

Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.