Yahoo is acquiring San Francisco-based BrightRoll, a company that specializes in video advertising, for the amount of $640 million in cash.
The acquisition could help Marissa Mayer, the CEO of Yahoo, in taking back online advertising revenue from rival companies Google and Facebook.
Mayer posted an announcement of the acquisition in Yahoo's official Tumblr page, where she described video as both one of the company's four strategic pillars and a growth business.
Mayer explained that there is a problem of fragmentation in online video advertising, spread out across up to millions of websites and apps. As such, advertisers are looking for ways to be able to purchase online video advertising all at once across several websites and through simpler, fewer transactions.
"BrightRoll provides an effective solution, aggregating high-quality publishers together into a unified network and utilizing programmatic advertising to allow real-time buying on the largest set of online video advertising inventory available," Mayer wrote.
BrightRoll hosts the videos of publishers, and through algorithms, will be able to assist them to choosing which advertisements to run against the videos. Advertisers also work with the company to select the most appropriate videos to sponsor.
The acquisition of BrightRoll will take Yahoo's expenses on acquisitions, since Mayer took over the CEO position in July 2012, to a total of $1.6 billion.
Mayer has been relentless in trying to take Yahoo back to the top of online advertising revenues. Once the market leader, Yahoo is expected to fall to fourth place for the year.
Research company eMarketer reported back in July that Google collected nearly 32 percent of all online advertising revenue last year, with Facebook a far second at about 6 percent. Yahoo took in only less than 3 percent of the online advertising revenue last year, and this year, eMarketer expects Microsoft to overtake Yahoo into third place.
BrightRoll will be able to provide the technology of hosting videos and serving advertisements to Yahoo, which is looking to turn Tumblr into a competitor to YouTube. The algorithms used by Bright Roll could also help Yahoo in more efficient matching for advertisers and videos to place the advertisements in, which could lead to higher prices for the same inventory of videos that the company already has.
BrightRoll's annual revenues of $100 million will also immediately help the top line of Yahoo's growth.
However, not all are as optimistic as Mayer on Yahoo's acquisition of BrightRoll. The overall consensus among industry experts is that Yahoo is paying too much for BrightRoll, which is a company that will not fill in the spaces that Yahoo needs to propel itself into relevance in the industry once again.
"Buying ad tech doesn't solve the company's fundamental problem as not being relevant to users (declining engagement) and consequently not having mindshare with advertisers/agencies. While it could help squeeze out higher prices from its own inventory, it cannot be a game changer," said a former executive for Yahoo.
