Yahoo Buys Flurry to Build Mobile Network, Including Native Ads

Mobile Ad-Tech Firm Gathers Audience Data From 540,000 Apps

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Mobile is the future of Yahoo's ad business.
Mobile is the future of Yahoo's ad business.

Yahoo has lost its hold of the desktop display advertising market. Now the portal is trying to get a grip on mobile.

Yahoo has agreed to acquire mobile ad-tech firm Flurry, the company said today, making a bid to boost its mobile ad revenue and offset its desktop business's years-long decline.

Scott Burke, senior VP-advertising technology, Yahoo, suggested that the company plans to use Flurry to erect a mobile ad network that could, among other things, run Yahoo's native ads in third-party apps.

"It's really the next chapter in Yahoo's mobile advertising strategy," Mr. Burke said.

The current chapter, certainly, is getting old. The deal for Flurry comes just over a year after Yahoo's first ad tech acquisition under CEO Marissa Mayer: the purchase of AdMovate, a startup that specialized in automated mobile ad buying. But even with more than half of Yahoo's monthly audience visiting the portal on their smartphones or tablets, only recently has the company gone from describing its mobile ad revenue as "meaningful" instead of "not material." It still doesn't break out mobile ad revenue in earnings reports.

Yahoo and Flurry did not disclose terms of their deal, which they expect to close before the fourth quarter. Flurry has raised $62 million in funding to date, Flurry CEO Simon Khalaf said.

Re/code first reported news of the deal on Monday.

Having ceded its desktop display advertising dominance to Google and Facebook, Yahoo could use Flurry to try to keep up with its usurpers in mobile. A mobile ad network and mobile app analytics provider, Flurry provides Yahoo mobile app audience data that can be used to target ads on Yahoo properties as well as a new revenue stream from mobile ads served outside of Yahoo.

"We have not launched ad products into third-party apps historically …. This is the big bet to watch," Mr. Burke said.

"We want to tidy things together and enable all the customers it has built over the years to integrate in and get access to the Yahoo advertising pool and vice versa help Yahoo advertisers get access to the Flurry community," Mr. Burke said.

He declined to commit to any plans before the Flurry deal closes but said that an off-Yahoo mobile ad network serving Yahoo's native ads in third-party mobile apps "is definitely part of the story."

Flurry serves up banner, full-screen interstitial and video ads in publishers' mobile apps. Its website lists The Guardian, mobile game developer Gree and location-based social network Skout among the publishers running its ads.

Participating apps to date only number about 8,000, a fraction of the more than 300,000 apps Google counts as part of its mobile ad network. But Flurry gathers audience data from more than 540,000 mobile apps.

"There are few companies with the reach that Flurry has …. That is the core value of this acquisition: the reach of their technology and footprint in all these apps, more than buying an ad business," said Will Kassoy, CEO of automated mobile ad seller AdColony, which itself was acquired last month by mobile browser maker and ad seller Opera Software.

Flurry already uses the data it collects to create audience segments for advertisers to target with in-app ads. Ad buyers can specify who they want to market based on age, gender, location and behavioral data inferred by Flurry, like whether someone is a mother or a cat lover. Those buyers' bids then get processed through Flurry's mobile ad exchange, which runs real-time auctions to nearly instantly deliver ads to intended audiences.

Flurry opened its mobile ad exchange less than a year ago but counts roughly 20,000 advertisers using it to buy ads at a given time, said Mr. Khalaf, the CEO.

Yahoo's ad sales teams could use Flurry's data trove to lure advertisers looking to better target their ad buys. And Flurry could use Yahoo's high profile among advertisers to attract mobile app developers looking to make money.

Yahoo's desktop display business has been in a rut for years. The company has failed to grow its overall display advertising revenue year-over-year for seven straight quarters and blamed the most recent decline to a "setback" in desktop display advertising, Ms. Mayer said during last week's earnings call.

In the second-quarter earnings call, Yahoo CFO Ken Goldman said mobile search ad revenue was "somewhat larger" than mobile display ad revenue. Ms. Mayer said combined mobile display and search advertising revenue grew more than 100% from the quarter a year earlier, but did not say what the figure was a year ago or now.

Google, Facebook and Twitter have each made big moves in recent years to stake a claim to rapidly growing small-screen ad market. Google bought mobile ad network AdMob in 2009 and now takes in 47% of mobile ad revenue worldwide, excluding the price of acquiring traffic for those ads, according to eMarketer estimates.

Facebook and Twitter have accelerated their mobile ad businesses over the last year, after years of limiting themselves to ads run on their respective social networks. Last September Twitter bought mobile ad exchange MoPub to open up an off-Twitter mobile ad revenue stream. And at the start of this year Facebook resurrected its mobile ad network in order to run ads in non-Facebook mobile apps.

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