Yahoo Buys Video Platform BrightRoll For $640 Million In Cash

Now we know what Yahoo is doing with its Alibaba “mad money.” As previously rumored, Yahoo has announced the acquisition of programmatic video platform BrightRoll.

The deal is worth $640 million in cash. Yahoo said that BrightRoll is profitable and expected to clear $100 million in revenue this year.

Video and video advertising are key areas of focus for Yahoo and this acquisition makes enormous sense. Yahoo claims that upon closing, its video network will be the largest in the US market. BrightRoll also enables cross-platform (mobile) video syndication and distribution.

Investors should cheer the move, intended to compensate for Yahoo’s flat display ad business. In a post on its tumblr blog Yahoo CEO Marissa Mayer said that she believes that video ads can “replace the branded banner advertisement”:

We say that video is display 2.0 because we believe it can reinvent and replace the branded banner advertisement. Video, along with mobile, social, and native, represents a new format of online advertising that has the potential to help us transform and modernize Yahoo’s display business and return it to growth.

Yahoo is arguably paying a premium for BrightRoll, although it’s less than the company paid for tumblr and, unlike tumblr, should immediately generate incremental revenue. As suggested, video advertising will probably replace conventional display advertising for brands, both online and in mobile. Video works especially well in mobile given that the creative is just being repurposed.

Below are some statistics included in the Yahoo release:

• BrightRoll powers digital video advertising for the world’s largest brands and agencies, including 87 of the AdAge Top 100 US advertisers, all of the top 15 advertising agencies, and all 10 of the leading demand-side platforms
• BrightRoll served more video ads and reached more consumers in the US in 2014 than any other platform, according to comScore
• Tens of thousands of sites and mobile apps send approximately two billion requests per day to BrightRoll to monetize the inventory they worked hard to create

The acquisition is expected to close in Q1 next year. Apparently BrightRoll will retain its full roster of 400 employees.