Yahoo Buys Video Ad-Tech Giant BrightRoll for $640 Million

Yahoo is about to go from an online video also-ran to the country's widest-reaching digital video ad seller. On Tuesday, Yahoo announced that it has agreed to acquire video ad-tech firm BrightRoll for $640 million in cash. Expected to close in the first quarter of 2015, the deal is the portal's second-largest acquisition under CEO Marissa Mayer, behind last year's $1.1 billion acquisition of Tumblr. Until recently Yahoo's biggest revenue stream was display advertising. But that business has been in a rut for a couple years. The company's display ad revenue hasn't had a quarter of year-over-year growth since the third quarter of 2012. The problem: advertisers aren't interested in buying Yahoo's higher-priced "premium" ads, instead preferring relatively cheap ads sold programmatically via computer-based auctions. BrightRoll is already profitable and expected to generate $100 million in revenue this year, excluding the money it pays out to publishers that run its ads, according to Yahoo. How it earns that money fills a big need for Yahoo. The ad-tech firm operates programmatic ad auctions but specializes in online's priciest ad format -- video -- and does so at a larger scale than Google, Facebook and AOL. That will give Yahoo a better sales pitch when angling for a share of advertisers' growing online video budgets. U.S. advertisers are expected to spend $6 billion on digital-video ads this year and $13 billion by 2018, according to eMarketer. BrightRoll is also well positioned as that spending shifts to programmatic platforms. This year only 12% of digital-video ad budgets will go towards videos ads bought programmatically, but that percentage will jump to 40% by 2019, eMarketer estimated. Following that trend, AOL, Facebook and Google have also ramped up their programmatic video businesses over the past 15 months. Last year AOL acquired video ad exchange Adap.tv, which helped AOL overtake Google as the country's largest video ad seller. Earlier this year Google announced that it would start building private video ad exchanges so top-shelf publishers could sell ads against their videos programmatically at a premium. And in July Facebook announced that it was buying LiveRail, which will allow it to sell video ads on other publishers' properties. In BrightRoll, Yahoo has picked up a company that beats Google, Yahoo and AOL when it comes to one of advertisers' most valued metrics: reach. BrightRoll serves desktop video ads to more of the U.S. population than any other digital-video company, according to comScore. Across desktop computers, BrightRoll's ads reached 52.4% of the U.S. population in September, compared to 52.0% for Facebook-owned LiveRail, 44.0% for AOL and 34.5% for Google. However, the research firm's measurements don't include mobile, which makes up half of Google-owned YouTube's monthly audience.

Yahoo Buys Video Ad-Tech Giant BrightRoll for $640 Million

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