M&A Alert—November 14, 2016
xAd acquires weather data site and application WeatherBug for an undisclosed amount.
Author: Eric Risley, John Ascher-Roberts
Transaction Size: Undisclosed
On November 14, 2016, xAd announced an agreement to acquire weather data site and mobile app provider WeatherBug for an undisclosed amount.
WeatherBug, a division of Earth Networks, provides weather information services to consumers in the United States through its website, desktop and mobile applications. It derives its neighborhood-level accuracy of weather data through managing and operating a proprietary network of over 8,000 WeatherBug Tracking Stations and more than 1,000 cameras that are placed at schools, public safety facilities and television stations throughout the U.S. Its mobile application, Spark, has consistently ranked in the top 10 in iOS and Android downloads per App Annie, and WeatherBug estimates that it has 20 million unique users per month. To provide accurate weather information, WeatherBug requests, and likely receives in very high proportion, the right to access the location services capabilities of users’ mobile phones.
Bob Marshall, CEO, founded WeatherBug under the Earth Networks umbrella in 1993.
Earth Networks collects and analyzes data from a variety of sensors, including weather stations, utility smart meters, connected thermostats, light bulbs, washer & dryers, hot water heaters and other connected devices. Through its data-driven intelligence, the company alerts consumers of weather changes, such as alerting them to approaching severe weather or an analysis of the health of their home appliances. For enterprises, Earth Networks ensures efficient business operations whether it is by providing forecast data and severe weather alerts to public safety and emergency response agencies, or by powering intelligent demand response for Utilities to deliver peak load savings. The company was founded in 1992 and is based in Germantown, Maryland.
xAd operates a location-intelligent mobile advertising network for publishers and developers. The company offers in-store targeting, proximity targeting, audience targeting, audience search, and attribution measurement solutions. According to the company, it can reach five hundred million global consumers via xAd’s ad network. Dipanshu Sharma, CEO, and Sunil Kumar, COO, founded the New York-based company in 2001. The company announced that it had a $250M revenue run rate as of May 2016, and has 413 employees.
The acquisition comes simultaneous with a $42.5M fundraising from Emergence Capital (Jason Green), Eminence Capital, Institutional Venture Partners (Dennis Phelps) and W Capital Partners. The company now has raised $116.5M total from the above and other investors including Palisades Growth Capital (Anders Richardson), SVB, SoftBank Capital (Steven Murray), Sorrento Ventures and Tech Coast Angels.
Sharma was the champion of the WeatherBug deal saying: “The power of our data gives businesses the fundamental ability to understand and serve their audiences better”.
xAd is acquiring for WeatherBug for an undisclosed amount.
Comparable transactions include IBM’s acquisition of the Weather Company in October of 2015 for $2.2B, SK Planet’s acquisition of Shopkick in September of 2014 for $250M (9.5x LTM revenue), Google’s acquisition of Waze in June of 2013 for $1.1B and eBay’s acquisition of Where in April of 2011 for $135M (7.9x LTM revenue, covered here).
WeatherBug brings xAd a large audience of consumers who have granted WeatherBug the right to monitor their location “in-the-background”, whether using the app or not. This right is extremely valuable to better understand consumer behavior, patterns of travel, demographics and real-time location; all valuable to better target consumers with advertising.
Historically, xAd has largely used a technique common to many location-oriented ad networks: monitoring of mobile app ad calls for location data. The quality and precision of these ad calls have many limitations. Much like Foursquare, xAd now owns a popular mobile app with location-awareness as an essential element of its value proposition.
Architect Partners’ Observations
The ability to precisely track consumers’ location is extremely powerful and coveted by advertisers. However, natural privacy concerns, legal regulations and app store requirements require explicit consumer consent to do so. Obtaining this opt-in can be a high hurdle for app publishers, limiting consumer consent and therefore the size of the audience. Weather is a natural app category where location is such an integral element of its value that consent rates are substantially higher than most mobile apps.
According to market researcher eMarketer, checking the weather is one of the most popular activities on U.S. smartphones. In a survey done by Skyhook Wireless & Research Now, it was found that 65% of US mobile users shared their location with weather apps. Weather has also been shown to have an immediate and measurable impact on sales, especially for retailers and other consumer businesses as shopping behavior can change dramatically depending on the season.