MoPub is an ad exchange that allows advertisers to buy mobile ads in real-time. Twitter plans to graft that onto its existing ad business which will allow advertisers to both buy Promoted Tweets in real time as well as target Twitter users on other mobile apps.
The deal extends a busy run for Twitter, which bought social TV analytics startup Trendrr two weeks ago and Bluefin Labs for a reported $90 million in February.
San Francisco-based MoPub employs about 100 people and counts mobile app publishers as clients, as well as demand side platforms that automate the buying of mobile ad inventory. It had raised a total of $18.5 million in venture capital.
Twitter will maintain MoPub's existing business, which MoPub said had reached a $100 million monthly run-rate earlier this year. The final purchase price is contingent on the value ascribed to Twitter's non-public shares, according to a person familiar with the matter.
In the near term, the deal is intended to drive up the number of buyers in Twitter's own ad ecosystem by ushering in brands that want to buy ads in real-time. The company's VP-product for revenue Kevin Weil said that MoPub's technology will be used to let Twitter advertisers bid on available impressions of users who match a certain category based on their web activity (i.e., auto intenders).
Twitter will eventually open up the bidding on segments of its ad inventory to MoPub's programmatic buyer customers, which will enlarge the number of participants in Twitter's ad auction and presumably drive up prices. He said that he expects the deal to close next quarter.
However, in the longer-term, there's a more expansive play, which may involve showing mobile ads to Twitter users in other environments. Mr. Weil said he ultimately expected the deal to result in more types of native ad placements across the mobile ecosystem, and not necessarily promoted tweets populating third-party apps, though he didn't go into detail.
"We believe that there are opportunities to improve the state of mobile advertising in general," he said. "One of the areas that stands to improve is the state of creative in mobile."
Guarding User Experience
As Twitter has grown as a business, one of the big questions about the sustainability of its ad model is whether it will simply show more ads to users as it acquires more advertisers. Purchasing MoPub potentially gives it a way to satisfy demand while ensuring that users aren't over-exposed to ads.
Assuming future high demand on Twitter, the company could hypothetically accept bids on the mobile exchange and opt to accept the highest-priced ones it receives to run as promoted tweets, while letting the lower-priced remnant be published within MoPub's marketplace of third-party apps. The end result for Twitter could be a greater share of mobile ad dollars funneling through its system.
Mr. Weil said that Twitter doesn't intend to show more ads to users in order to satiate increased advertiser demand.
"There are no plans to change any of our quality thresholds," he said.
Acquiring a mobile ad exchange is a way for Twitter to crank its mobile ad revenue as it marches toward an anticipated initial public offering in early 2014. EMarketer projects Twitter will bring in $308.9 million in mobile ad revenue this year and $551 million in 2014.
Contributing: John McDermott.