Madison Alley Insight by Boris Fridman, Managing Director, Media & Ad Tech Platforms
On July 21, Yahoo (NASD: YHOO) announced that it has reached a definitive agreement to acquire mobile advertising company Flurry.
Flurry
Founded in 2005, Flurry is best known for its mobile analytics. More than 170,000 developers have integrated Flurry’s free Analytics SDK into more than 540,000 apps, including Skype, Zynga, Pinterest, and Snapchat. Its technology measures user behavior by tracking taps, swipes, purchases, level completions, and other user interactions with an app. App developers use Flurry Analytics to improve how apps work and to understand ways to better monetize app usage.
Analytics is not all that Flurry offers. The company makes money by providing monetization solutions to mobile publishers. It supports programmatic selling of display ads, competing directly with Twitter’s MoPub, Inneractive (an independent programmatic ad platform for mobile publishers), and other mobile ad exchanges. Flurry has also built a growing mobile video advertising business and sells app marketers solutions for incentivized app downloads.
Flurry uses data from Flurry Analytics to enhance its advertising platform by enabling advertisers to target specific audiences in Flurry’s network. The company has been aggregating vast amounts of behavioral data that have become very valuable for ad targeting and in-app commerce.
Flurry raised about $74 million of equity and debt from investors including DFJ, Crosslink Capital, Menlo Ventures, and Union Square Ventures.
The Mad Alley View
It might appear that Yahoo bought Flurry primarily for its mobile app analytics business. Indeed, the company’s analytics SDK has been installed in more than half a million mobile apps, and it continues to add more than 20,000 new apps monthly. Flurry tracks more than 150 billion app sessions every month, accumulating immensely valuable consumer insight.
However, our knowledge of Yahoo leads us to believe that Yahoo was not mainly interested in Flurry for its analytics. Flurry provides Yahoo a complete mobile advertising stack and a diverse, global mobile advertising business with gross revenue that we estimate to be well in excess of $100 million.
We expect Yahoo to integrate Flurry’s programmatic ad exchange with Yahoo’s marketplace called Yahoo Gemini, which was launched earlier this year. Already more than fifty DSPs are buying mobile ads from Flurry RTB exchange benefiting from detailed targeting options that Flurry provides.
Yahoo will also benefit from robust video features that are integrated into the Flurry RTB Marketplace and from Flurry’s considerable reach.
In short, the acquisition of Flurry enables Yahoo to become a viable contender alongside Facebook, Google, and Twitter for mobile ad dollars, which according to Gartner, will reach $42 billion by 2017.
M&A Focus of Yahoo
According to Yahoo’s last 10-Q filing; the company had more than 430 million monthly mobile users, yet its mobile revenue is still “not material” to total revenue.
With nearly half of Yahoo’s traffic coming from mobile devices, the company has increased its focus on mobile products and mobile ad formats. It introduced new mobile apps and updated the user experience of Yahoo! Sports, News, Mail, and Finance.
Although Flurry is its most significant mobile purchase, Yahoo has made a number of mobile acquisitions, including recent purchases of mobile marketing firm SPARQ, intelligent home-screen for Android startup Aviate, and mobile messaging platform Blink.
It is high time that Yahoo convert its strong momentum in mobile usage into actual advertising revenue dollars.
We welcome your comments. Please contact Boris Fridman (twitter: @borisf), Managing Director of Madison Alley Global Ventures.