Bengaluru-based advertising technology company InMobi on Wednesday said it has bought American mobile video ad start-up AerServ for $90 million in a cash-and-stock deal. The acquisition, its biggest yet, aims to boost its capabilities in the video ads sector, which is expected to become a multi-billion dollar business over three to five years.
Talks with AerServ began at least six months ago, InMobi founder and chief executive officer (CEO) Naveen Tewari said.
“What this (acquisition) does to us is a few things—firstly, AerServ’s capabilities are significantly in the video space and more specifically in the video programmatic space. If you look at the direction that the world is taking from an advertising and marketing point of view, it is significantly becoming a world that’s all about video and all about doing things programmatically. Now what AerServ has is best in-class technology in the form of video programmatic… our acquisition of them gives us that capability,” Tewari said in an interview.
Programmatic advertising refers to the use of technology and software to automate the process of purchasing digital advertising.
The acquisition also expands InMobi’s presence in the US, the world’s biggest market for advertising. “This also gives us a presence in Southern California, which is Los Angeles. We didn’t have a presence there…What it also does is this allows us to launch the first video (programmatic) platform in China. We’ll take the same platform and bring it to China and India..and we will launch it this year,” said Tewari.
“As advertisers think about moving to more video-based advertising and wanting to do so programmatically, there is no such solution that existed in India and in China. Till now, it was largely a US phenomena. Both of these trends of video being the next big thing in advertising and programmatic being the next big trend in advertising were something that India and China were yet to essentially capture,” added Tewari.
With this buyout, video and programmatic business will contribute 35% to InMobi’s overall revenues. InMobi will also absorb 65-70 employees and executives from AerServ, bringing its total headcount in the US to roughly 150.
“Now, it’s all about scaling this up. We don’t necessarily need to inorganically invest any more in the video (programmatic) space. AerServ is a fairly large bet for us in this space, so I don’t think we’ll need to make any more (inorganic) investments in this space, at least in the foreseeable future. We are solid in this space for now,” said Tewari.
“We are going to use inorganic as a way to push forward and move away from the past. We evaluated six to seven companies in this (video) space and we found that AerServ’s technology was probably the best and the most rapidly growing. It’s a four-year-old company, growing like crazy in their space…what we bring to the table is massive scale, which is what AerServ needs—to be able to be in front of significantly more number of customers, advertisers, publishers, etc. So they get massive scale from us, not just in the US, but globally,” added Tewari.
The acquisition comes at a time when InMobi has prioritized profitability over growth in the past two years. Mint had reported in April last year that the company eked out a net profit in the last quarter of 2016 and had set a target to turn profitable in 2017. InMobi went on a hiring spree in 2012 and 2013 with disastrous consequences. And some of its products have flopped. One such, launched in 2015, was Miip, which took the form of an animated monkey that tracked users’ browsing habits across mobile apps and showed ads in the forms of bubbles and animations instead of traditional display ads.