To date, the company–which makes the leading open-source ad serving software, catering to about 30,000 Web publishers on 100,000 Web sites–has raised $30.8 million. “We raised $15.5 million at the end of 2007 and still had a chunk of that left, so we didn’t have to raise money,” OpenX CEO (and former Yahoo Senior VP) Tim Cadogan told The Deal. “But if it’s generally true that it makes sense to raise money when you don’t need it, in this environment, it is triply true.”

Quadruply true when you’re competing with the likes of Google’s (GOOG) Double Click and Yahoo’s (YHOO) Right Media, which dominate the Internet advertising market in which OpenX plays.

Subject: our board’s decision

Yahoos,

As you’ll see from the news release we issued today, our Board of Directors has reviewed Microsoft’s unsolicited proposal with Yahoo’s management, financial and legal advisers. After a careful evaluation, the board has unanimously concluded that the proposal is not in the best interests of Yahoo and our stockholders. Of course, the Board of Directors is continuously evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for stockholders.

We believe Microsoft’s proposal substantially undervalues Yahoo–including our highly recognizable global brand, large worldwide audience, significant recent investments in advertising platforms, future growth prospects, our ability to generate free cash flow and our earnings potential as well as substantial unconsolidated investments (like Alibaba and Yahoo Japan).

You deserve the credit for the tremendously valuable business we have built. All of us in management, as well as the members of the board, deeply appreciate and respect what you have done and continue to do in order to maintain and enhance Yahoo’s leadership position in the online world.

We have been very deliberate about the steps we are taking to position Yahoo. We are putting in place the pieces we need to accelerate growth by becoming a leading starting point for users and the must-buy for advertisers. The global online advertising market is projected to grow from $45 billion in 2007 to $75 billion in 2010, and our more focused strategies position us to capture an even larger share of this market. We are moving to take advantage of this unique window of time in the growth of the online advertising market to build market share and to create value for stockholders.

Several key assets form a solid foundation as we execute this strategy.

First, our global brand is a tremendous base from which to build leadership as the starting point for Internet use: Yahoo is one of the most recognizable and admired brands in the world. We have some 500 million users (1 out of every 2 internet users worldwide). In the U.S., we are No. 1 in personalized home pages, mail, music, news, sports, shopping and travel. Yahoo also is No. 1 in time spent on our sites, an increasingly important metric for marketers.

Second, our substantial operating cash flow, which we expect to grow in the double digits in 2009, gives us the financial flexibility to execute our plans.

Third, we have made important investments in our core computing infrastructure that provide us greater scalability and increase the rate of iteration on core technologies like algorithmic search as much as tenfold. And of course, you’re familiar with our investments in enhanced search technology through Panama.

These assets–the brand, the audience, the financial strength, and the technology–position us to capitalize on this pivotal moment for Yahoo and the online marketplace. Of course, our most important resource is you: the thousands of creative, passionate and committed Yahoos who are executing our strategies to deliver value for users, advertisers, publishers–and stockholders.

As you know, we have taken significant steps to refocus our business on our starting point–must-buy strategies. And we’re making headway.

Starting points: Our goal is to grow visits to key Yahoo starting points and properties, by approximately 15% per year over the next several years. And we’re on the move: We are the most visited site in the U.S., and the number of U.S. users grew strongly in the double-digits in 2007 on our yahoo.com home page alone. as our open platform takes shape, it will significantly accelerate that growth.

Mobile, as an area of focus, is the biggest emerging starting point in the world. With twice as many mobile users as personal computer users and projections for substantial advertising growth in mobile, we have an important competitive edge as the No. 1 mobile destination in the U.S., and we are building a superior mobile experience for Yahoo users to further capitalize on this opportunity.

Must buy: At the same time, we will increasingly make online advertising easier and more effective for marketers, opening up new ways for them to address consumers. Our Right Media Exchange, acquired last year, is more open and easy to use, simplifying transactions for buyers and sellers of online ad inventory. Another 2007 acquisition, BlueLithium, brings us best-in-class performance marketing. While we’ve historically tracked the success of our ad business by focusing on metrics related to our owned and operated sites, our goal is to increase the percentage of the total online advertising demand we touch–to 20% of our addressable market over the next several years, from an estimated 15% in 2007.

Our newspaper consortium is a great example. It has grown to more than 600 newspapers, up from just 264 just seven months ago. Combined with eBay, Comcast, AT&T and others, we are creating a valuable, unique network of premium sites to serve our advertisers.

Our key strategies will be enhanced by our adoption of platforms that welcome third-party developers and encourage new applications that will enrich the user experience.

Finally, beyond our core strategies, there’s the added benefit of our substantial, unconsolidated investments in China and Japan: We have major positions in Yahoo Japan, the leader in its market, and Alibaba, which is strongly positioned in China, a market with enormous growth potential.

We have accomplished a great deal in a very short time. Yahoo is a faster-moving, better organized, more nimble company well on its way to transforming the experiences of its users, advertisers, publishers and developers.

I hope you are as proud as I am of the Yahoo we have built and we continue to build. Thanks for your hard work.

Jerry

Regardless, Microsoft’s not sweating it a bit. “We’re happy with the price we paid. We believe it’s exactly the right company to buy, so we’re willing to pay the value we are paying today,” said company CFO Chris Liddell during a call with analysts today. “We will use the strength of our balance sheet when we think it’s necessary to drive growth going forward. This deal takes our advertising business to a new level. This allows us to take a bigger piece of that $40 billion pie that is still growing.”

The WPP-24/7 Real Media deal follows Google’s recent acquisition of DoubleClick and Yahoo’s purchase of Right Media and puts to rest rumors that Microsoft was considering offering as much as $1 billion for 24/7 Real Media. Which begs the question: Has the software giant turned its attentions to aQuantive or ValueClick? Or has it concluded that there’s no reason to acquire an ad network when it already has a killer publisher ad server?

That scene springs to mind in light of reports that Microsoft, after losing DoubleClick to Google and Right Media to Yahoo, is mulling a $1 billion bid for online advertising outfit 24/7 Real Media (see “Takes a Convicted Monopolist to Know One? Ha, Ha, Ha. You Google Guys Are a Real Laugh Riot” and “What? You Thought Yahoo Was Going to Use a Google-Owned Ad-Serving System?”) Which is not to suggest that 24/7 isn’t a worthy acquisition target, just that Microsoft clearly hasn’t scored first choice in this little online advertising M&A dance. And, adding insult to injury here is the fact that this rumored bid for 24/7 is anything but a sure thing. WPP Group, the world’s second-largest advertising company, is also thought be a suitor for 24/7. Given its recent track record, maybe it’s time for Microsoft to move on and start looking at someone else. Like aQuantive. Or (smirk) Yahoo.

At the next all-hands. Just as a reminder. I’m sorry I didn’t do it today. I’m gonna put up there all of the press reports on how Yahoo was going out of business five years ago. And of how we were gonna be swallowed up by AOL, owned by Time Warner, and by Microsoft, and by everybody else. And Yahoo looked like it had a dim future. Well those headlines, of course, were used to wrap a lot of fish in a lot of people’s houses, as the expression goes. And they were all full of s—, and they had no idea what we had planned for them. And they do not now as well! So, we could read about how I’m gonna join some retirement home. And we could read about how the company doesn’t have a vision. And we could read about how we can’t do this and we can’t do that. Trust me, they will be as full of s— this time as they were last time.”

– Yahoo CEO Terry Semel, Dec. 6, 2006

Semel was right about one thing, anyway: Yahoo does have a vision. Google’s. To recap, first Yahoo made Gmail-like improvements to its email service, then it launched its version of the Google blog. Yahoo takes on Google Desktop Search and AdSense followed. And now, weeks after Google spent $3.1 billion to purchase Internet advertising company DoubleClick, Yahoo has countered with an advertising acquisition of its own (see “Hello, Office Depot? Mr. Ballmer Needs a New Chair … Yes, Again.” and “Takes a Convicted Monopolist to Know One? Ha, Ha, Ha. You Google Guys Are a Real Laugh Riot“). This morning the company said it has agreed to acquire the rest of online ad exchange Right Media. Yahoo, which bought a 20% stake in Right Media last October, will pay $680 million, in equal parts of stock and cash, for the remaining interest in the company.

Now, $680 million might sound exorbitant, but Yahoo needed to parry Google’s advance into the graphical online advertising market. And not just to protect its turf. Yahoo is a DoubleClick customer, and the search juggernaut’s acquisition of the company could turn Yahoo into a Google client. By purchasing Right Media, Yahoo gives itself a DoubleClick exit strategy and some talking points with which to disparage it. “We think supply and demand should be regulated by the marketplace, not a closed platform,” Yahoo CEO Terry Semel wrote in a post to his Web log . “We think our open approach is a clear differentiator from others in the industry and will provide significant benefits to publishers and advertisers.”