Nov. 12 (Bloomberg) — Yahoo! Inc. agreed to acquire video-advertising service BrightRoll Inc. for about $640 million in cash, adding marketing tools to drive CEO Marissa Mayer’s turnaround effort.
BrightRoll, one of Yahoo’s biggest deals under Mayer, is profitable and should exceed $100 million in revenue this year, the web portal said yesterday in a statement. Yahoo expects the purchase, which is subject to customary closing conditions, to boost earnings before certain items.
The acquisition would help bolster Yahoo’s position in a growing part of the digital-advertising market. Revenue from online video ads may surge 56% this year in the U.S. to $5.96 billion, according to researcher EMarketer Inc. Yahoo will have just 2.4% of the worldwide market for all digital ads this year, lagging behind Google Inc. and Facebook Inc.
“Video, along with mobile, social, and native, is driving a surge in digital advertising,” Mayer said in the statement. “BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business.”
San Francisco-based BrightRoll serves many of the largest brands and agencies, including 87 of the AdAge Top 100 U.S. advertisers, according to the statement. It specializes in what’s called programmatic advertising, which helps automate the buying of ads. EMarketer estimates that the market for programmatic video ads in the U.S. will rise to $3.84 billion by 2016 from $710 million this year.
Investor Criticism
Mayer, who joined the company more than two years ago, is facing shareholder criticism for racking up acquisitions as the company struggles with little revenue growth. In September, activist investor Starboard Value LP questioned Mayer’s leadership and called for a breakup of the Sunnyvale, CA-based company. Starboard also asked that Yahoo cease from more dealmaking and cut costs.
On a conference call last month, Mayer said acquisitions have helped increase Yahoo’s user growth. The company’s total user base, including blogging platform Tumblr, has expanded to more than 1 billion and mobile users are at about 550 million, she said. Yahoo bought Tumblr last year for about $1 billion.
The BrightRoll deal would combine Yahoo’s premium desktop and mobile video-advertising inventory with BrightRoll’s programmatic platform and publisher relationships, the company said. BrightRoll plans to continue offering its products and services after the acquisition, while keeping about 400 employees.
Alibaba Benefits
Yahoo stock had risen 45% in the 12 months through yesterday, largely because of the company’s stake in Alibaba Group Holding Ltd., owner of the biggest Chinese e-commerce company. Yahoo sold some of its shares in Alibaba’s initial public offering in September and retains about 15% ownership. The shares rose 0.9% to $49.51 at 9:32 a.m. New York time.
The BrightRoll acquisition in no way detracts from the company’s commitment to “be a good steward of capital,” Mayer said in a Tumblr post yesterday.
Yahoo is “continuing our track record of returning excess capital to shareholders and exploring smart, tax-efficient solutions for our stake in Alibaba,” she wrote. “We continue to be optimistic about our progress on those efforts, and we will be back to you with an update by our next earnings release.”
BrightRoll’s backers include Scale Venture Partners, True Ventures, Adams Street Capital and KPG Ventures.
“We are very, very proud with what we’ve accomplished and built over the last eight years,” BrightRoll CEO Tod Sacerdoti said in an interview. “But we have grander aspirations, and we think that this relationship will really help us accelerate the achievement of our vision.”
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