M&A Alert—September 9, 2013
Twitter Acquires Mobile Ad Exchange MoPub for $350mm
Author: Tom Brehme
Transaction Size: $350mm
MoPub is a mobile ad exchange platform that helps mobile app publishers manage and sell their ad inventory. MoPub selects which ads to show based on information present in the request, serves those advertisements on mobile websites and mobile apps and tracks the progress of advertising campaigns. MoPub enables direct selling of ad inventory to advertisers as well as the option to sell unsold inventory through mobile ad networks. MoPub’s mediation makes it possible to work with multiple ad network partners without integrating native SDKs or going through the AppStore / Android Market update cycles.
The company’s products include the MoPub Marketplace, which is a real-time bidding (RTB) exchange that helps advertisers bid for individual ad impressions the moment they became available. The company aggregates multiple sources of advertising, including direct ads, house ads and RTB all into a single product. MoPub conducts over 2b ad auctions each day and reaches more than 550mm unique devices each month. Approximately 20 percent of ads on the MoPub exchange are cleared through real-time bidding, with more than 75 bidders including InviteMedia, Turn, AppNexus and Jumptap.
Current customers include WordPress, Flixster, Ngmoco, OpenTable and Songza. MoPub also has a location targeting business in partnership with Placecast.
Bryan Atwood, Nafis Jamal and Jim Payne, all previous employees at Google-owned mobile ad network AdMob, founded MoPub in 2010. The company, which has 100 employees, is based in San Francisco and has an additional office in New York City. The company has raised $18.5mm in funding from Jafco Ventures (Jeb Miller), AngelPad, Accel Partners (Richard Wong), Harrison Metal Capital and Iris Capital (Denis Barrier).
Twitter is an online social network that features micro-blogging messages (“tweets”) and the ability to connect with and follow fellow members. According to statistics released in August 2013, Twitter has over 500mm registered users and over 200mm monthly active users. There are over 400mm tweets sent from Twitter every day and an aggregate database of 170b tweets since Twitter’s inception in 2006. Twitter’s projected annual revenue is $583mm for 2013 and $950mm for 2014. The company is expected to file for a public offering next year.
MoPub CEO Jim Payne will join Twitter as VP of Exchange. MoPub states the company will not be changing after the acquisition, and Twitter claims to continue investing in MoPub’s core business. Kevin Weil, VP of Product and Revenue at Twitter, was a key executive sponsor of this acquisition.
TechCrunch reports Twitter is paying $350mm in stock for MoPub. In May 2013, MoPub disclosed the company had reached a $100mm revenue run rate, and sources familiar with the company claim it operates at about a 25 percent gross margin.
Transaction Value: $350mm
TV/Revenue Run Rate ($100.0mm) 3.5x
TV/Invested Capital ($18.5mm) 18.9x
Comparable transactions in the mobile ad space include Millennial Media’s acquisition of Jumptap for $237mm (3.7x revenue), SingTel’s acquisition of Amobee for $321mm (10.7x revenue), Apple’s acquisition of Quattro Wireless for $275mm (13.1x revenue), Google’s acquisition of AdMob for $750mm (18.8x revenue), Opera’s acquisition of AdMarvel for $8mm – $23mm and ValueClick’s acquisition of Greystripe for $70mm (2.3x – 2.8x revenue).
Twitter’s acquisition of MoPub capitalizes on two important trends within the ad-tech industry: first, the explosion in mobile device usage and second, an industry-wide shift toward programmatic and RTB ad buying. Twitter intends to incorporate MoPub’s technology into its own ad platform, allowing advertisers to easily automate and serve their ad buys while also significantly expanding their reach.
Architect Partners’ Observations
This acquisition reflects Twitter’s intention to grow its footprint in mobile advertising and the underlying ad-technology serving this market (namely programmatic ad buying and RTB). By acquiring MoPub, Twitter enhances the scale and reach it can offer advertisers and can now contribute valuable 3rd party data (demographic, audience, app categories, mobile website and app history, etc.) to its advertisers’ campaigns. Ad targeting based on this data could complement social network activity and result in more effective mobile ad campaigns.
Twitter currently owns 3.5 percent of mobile ad revenue in the United States, and is competing with industry giants Google and Facebook (who own 52 and 15 percent respectively) to gain market reach and relevancy. Other competitors are YP (4.9 percent), Pandora (4.9 percent) and Apple iAd (2.8 percent).
This acquisition also continues the trend of consolidation within the mobile ad-tech market (Millennial Media recently acquired Jumptap in mid-August), which is viewed as being oversaturated with multiple players offering similar services. Interestingly, both Jumptap and MoPub acquisitions were structured as all stock deals, suggesting the unpredictability of the mobile ad-tech market in general. However, considering MoPub has only raised $18.5mm compared to Jumptap’s $121.5mm, along with Twitter’s growing IPO momentum, this acquisition seems to be the better exit for investors.