ValueClick Pays Big Money for Small Mobile Ad Network Greystripe

$70 Million Acquisition Marks Online Marketing Network's First Major Step Into Mobile Advertising

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Taking yet another mobile ad network off the table, online marketing network ValueClick has acquired Greystripe for $70 million in cash.

Although Greystripe's price tag comes in way below other notable mobile-ad-network acquisitions -- namely, AbMob to Google for $750 million and Quattro Wireless to Apple for $275 million -- ValueClick still paid a handsome sum for a relatively small player.

While the San Francisco-based company reports it has access to 30 million users of touchscreen mobile devices, research firm IDC does not rank Greystripe in the top five in 2010 revenue for U.S. mobile display. Google and Apple ruled about 19% apiece in mobile-display market share last year; Greystripe, lumped in with a number of other outfits that IDC classifies as "other," together make up 16% market share.

ValueClick has built a sizable online-ad business through affiliate marketing, ad serving and display. This deal marks its first major step into mobile advertising. For the first quarter ValueClick reported a 22% bump in revenue to $116.5 million and a 28% rise in profit, before interest and taxes, to $35.1 million. The U.S. mobile ad market is expected to top $1.1 billion by year's end. For the balance of this year, Greystripe is expected to contribute $24 million to $26 million in revenue and $2 million to $3 million in pre-taxed income. Greystripe will operate as a wholly owned subsidiary within ValueClick.

Greystripe has built its business primarily on high-end, mobile-rich media ads akin to Apple's iAd. This breed of premium ads has proven in some cases to be more effective than low-rent, static mobile display. When Apple locked Adobe out of its mobile devices, the creative-tools company partnered with Greystripe last summer to bring Flash rich media to mobile.

There are still a number of independent mobile-ad networks up for grabs. The two largest are Millennial Media and JumpTap, which are No. 3 and No. 5 by U.S. mobile display revenue, according to IDC. JumpTap most recently raised $20 million in new funding. Millennial, sometimes rumored to be a potential acquisition target for Microsoft, is more likely to IPO than sell, according to mobile industry executives.

Market share and the size of a network are extremely important in the mobile ad market. Unlike the online world -- where rich media creative can live virtually anywhere on the web -- the big players with the majority of in-app inventory, Google and Apple, do not often accept creative from other platforms.

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