Yahoo Inc is buying digital video advertising service BrightRoll for US$640 million in the Internet company’s latest attempt to boost its revenue after years filled mostly with financial futility.
BrightRoll, based in San Francisco, helps to automatically place ads in videos displayed on personal computers and mobile devices. Since its founding in 2006, it has built relationships with most of the biggest advertisers in the US, helping the service generate more than US$100 million in annual revenue, according to Yahoo.
That makes the BrightRoll deal look quite different from the only larger acquisition that Yahoo has made since hiring Marissa Mayer as its chief executive in July 2012. Mayer bought online blogging service Tumblr for US$1.1 billion last year, even though that New York company had not yet proven it could make money.
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In contrast, BrightRoll already is profitable, according to Yahoo. Meanwhile, Tumblr is not expected to bring in US$100 million in annual revenue until next year, at the earliest.
“Acquiring BrightRoll will dramatically strengthen Yahoo’s video advertising platform,” Mayer predicted in a blog post on Tuesday.
Investors did not seem to be as enthusiastic about the deal. Yahoo’s stock dipped US$0.03 to US$49.02 in extended trading.
If Mayer is right, BrightRoll could help Yahoo reverse a long-running decline in display advertising — a category consisting of video pitches and other marketing with a visual element. Through the first nine months of this year, Yahoo’s display advertising revenue had declined 4 percent from last year to US$1.2 billion after subtracting commissions.
Meanwhile, ad revenue at Google and Facebook has been steadily rising by 20 percent or more in most quarters as marketers pour money into digital campaigns to connect with consumers spending more time gazing into screens on PCs and mobile devices.
Yahoo’s share of the worldwide ad market now stands at about 2.4 percent, down from 3.9 percent in 2011, according to the research firm eMarketer. Facebook’s share has climbed from 3.6 percent in 2011 to a projected 8 percent this year, while Google has held on to a 32 percent share of a much larger market.
The acquisition announced on Tuesday comes as Mayer is under more pressure to get Yahoo rolling in the right direction now that the company has brought in more money from its recent sale of Alibaba Group Holding Ltd (阿里巴巴) stock.
Activist shareholder Starboard Value LP issued a challenge to Mayer in September in a letter critical of the more than 30 acquisitions that she had previously made for a total of about US$1.6 billion. Those acquisitions seemed to make little financial sense, according to Starboard, which urged Mayer to consider buying rival AOL Inc as a way to save money and bring in more ad revenue. Yahoo so far has not given any indication that it is interested in joining forces with AOL, which currently has a market value of about US$3.5 billion.
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