Yahoo! to acquire video ad company BrightRoll for $640 mn

Yahoo! Inc. today struck a deal to buy video-advertising company BrightRoll Inc. for around $640 million in cash, as part of chief executive officer Marissa Mayer's plan to turn around the once mighty internet giant.

The proposed acquisition is Yahoo's second major purchase after Tumblr under Mayer, who was hired in 2012 to help lift the struggling former web powerhouse out of its prolonged troubles.

It is also Yahoo's second-biggest acquisition after it paid $1.1 billion in 2013 for New York-based social blogging site Tumblr.

''Video, along with mobile, social, and native, is driving a surge in digital advertising. Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business,'' said Mayer.

"As with every acquisition, we have been extremely thoughtful about our approach to the video advertising space. This acquisition will accelerate the growth of both companies – we can help BrightRoll scale to even more advertisers globally and they can bring their tremendous platform offering to Yahoo's advertisers,'' she added.

Founded in 2006 by its current CEO Tod Sacerdoti, BrightRoll automatically places video ads across desktop, mobile and connected TV.

BrightRoll technology collects and analyzes hundreds of billions of data points monthly enabling real-time decisions that drive ROI for advertisers

The company powers digital video advertising for the world's largest brands, including 87 of the top 100 US advertisers and 18 of the top 20 advertising technology companies.

The platform enables advertisers to reach 4 in 5 video viewers online and consistently ranks as one of the industry leaders in ads served.

It generates more than $100 million in annual revenue, according to Yahoo.

The San Francisco-based company has raised $40 million in funding from investors including Adams Street Partners, Scale Venture Partners, Comerica Bank, True Ventures, Trident Capital, KPG Ventures, Michael Tanne, Fabrice Grinda, Auren Hoffman and Jeff Clavier, according to CrunchBase.

The market for programmatic video ads in the US will rise to $3.84 billion by 2016 from $710 million this year, according to estimates from research firm eMarketer.

According to eMarketer, Yahoo's share of the worldwide ad market is around 2.4 per cent, down from 3.9 per cent in 2011, while Facebook's share has risen from 3.6 per cent in 2011 to a projected 8 per cent this year and Google holds 32 per cent.

Yahoo said that the acquisition will accelerate its strategy, which is focused on search, communications, and digital content through growth in mobile, social, native, and video advertising and added that the acquisition will also strengthen its video advertising platform, making it the largest in the US.

Mayer has recently come under pressure from investors to get Yahoo on track. Activist shareholder Starboard Value has criticised Mayer that the more than small 30 acquisitions made for around a total of about $1.6 billion has brought little or no benefit to the company.

Mayer has not been shy when it came to acquiring assets that she thought would help her turn Yahoo around. The additions unfortunately have yet to make a significant impact to improve the company's online advertising business.

Starboard advocates Yahoo buy rival AOL Inc as a means to increase the company's ad revenue. AOL currently has a market cap of about $3.5 billion.

Last month Starboard had sent a letter to Meyer urging her to sell Yahoo's remaining stake in both Alibaba and Yahoo Japan even as it combined with AOL, a move that would ultimately amount to AOL purchasing Yahoo "with AOL as the surviving entity in a combination." (See: Yahoo likely to reap $11 bn in potential break-up)

 According to commentators this comes after Starboard's 2012 bid to shake up AOL, when AOL thwarted a bid by the group to again entry into its board. Although AOL was able to win a proxy vote that allowed its board of directors to continue, CEO Tim Anderson was forced to follow a number of Starboard directives.

Yahoo stock had soared 20 per cent over the past six months, often jumping whenever Chinese e-commerce company Alibaba Group Holding's initial public offering IPO was in the news.

Yahoo in September sold some of its shares in Alibaba's IPO, raking in $5 billion (after taxes). It still holds about 15 per cent or 384 million shares currently worth around $44 billion.