The acquisition, which was announced on Tuesday, is an all-cash deal that will bolster Yahoo’s existing advertising offering, which has struggled to transition away from older display ads.
The $640 million price tag makes Brightroll one of Yahoo CEO Marissa Mayer’s most expensive acquisitions behind Tumblr, which the company bought for $1 billion last year. Unlike Tumblr, Brightroll is already profitable with $100 million in revenue, a point Yahoo emphasized in the press release.
Brightroll is the first major acquisition by Mayer since Yahoo’s coffers were filled with cash from the IPO of Alibaba. The sale of part of its stake in the Chinese ecommerce giant left Yahoo with $4.3 billion after tax, although a large chunk of that is slated to be returned to the company’s shareholders.
The move is not much of a surprise, as TechCrunch had previously reported the two companies had been in talks. Yahoo had previously been linked to other video platforms as well, including content creator Fullscreen.
Yahoo buying Brightroll is reminiscent of AOL’s purchase of Adap.tv, a similar company that focuses on digital video advertising.
Yahoo claimed in the press release that the addition of Brightroll’s inventory to its existing stock would make it the largest video ad platform in the U.S.
Video is one of the fastest-growing segments of online advertising. eMarketer expects nearly $6 billion to be spent in 2014 and to more than double that by 2018.
“Video, along with mobile, social, and native, is driving a surge in digital advertising. Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business,” Mayer said in a press release.
News of the acquisition barely budged Yahoo stock in after hours trading.
Yahoo said it will retain Brightroll’s 400 or so employees, who will remain focused on video advertising.