M&A Alert—July 22, 2014
Yahoo Acquires Flurry, A Mobile App Analytics and Advertising Platform
Transaction Size: $200 - $300mm
On July 22, 2014, Yahoo (NASDAQ: YHOO; market cap: $34b) announced the acquisition of mobile app analytics and advertising platform Flurry. Although deal terms were not officially disclosed, TechCrunch reports Yahoo paid between $200 – $300mm.
Flurry provides analytics that enable app developers to understand how consumers interact with their mobile applications. Over 170,000 developers use Flurry Analytics to gather data usage from 500,000 applications on 1.4 billion devices every month. Flurry is capable of measuring audience reach, engagement, retention, conversion rate and revenue, among other metrics. Flurry’s SDK is free, takes a few minutes for basic integration and is available for iOS, Android, Windows Phone, HTML5, hybrid apps, mobile/web, Blackberry and JavaME. Flurry was an early leader in app analytics and remains a popular choice with app developers.
Flurry uses the app data it collects to create audience segments for advertisers to better target consumers with in-app ads. Ad buyers can specify who they want to target based on age, gender, location and behavioral data inferred by Flurry, like whether someone is a mother or a cat lover. Those buyers’ bids then get processed through Flurry’s mobile ad exchange, which runs real-time auctions to instantly deliver ads to intended audiences. Flurry opened its mobile ad exchange less than a year ago but already counts roughly 20,000 advertisers as customers. Flurry serves banner, full-screen interstitial and video ads in publishers’ mobile apps. The Guardian, mobile game developer Gree and location-based social network Skout are among the publishers running Flurry ads.
Founded in 2005 and based in San Francisco, CA, Flurry has raised $73mm in 5 rounds of funding from Borealis Ventures (Matt Rightmire), CrossLink Capital (Nick Mignano), Draper Fisher Jurvetson (Jennifer Fonstad), First Round Capital (Christopher Fralic), InterWest Partners (Bruce Cleveland, Douglas Pepper, Keval Desai), Menlo Ventures (Sonja Perkins), Neu Venture Capital, Union Square Ventures (Bradford Burnham) and Version One Ventures (Boris Wertz).
Flurry will continue to operate as a standalone service.
Yahoo offers Internet search capabilities and display advertising, as well as a wide variety of online tools and platforms including Yahoo News, Sports, Finance, Entertainment, Mail, Messenger, Groups, Answers, Flickr and social blogging platform Tumblr (which the company acquired in May 2013 for $1.1 billion).
In Yahoo’s Q2 2014 earnings call earlier this month, CEO Marissa Mayer stated that Yahoo is a mobile first company, with more than half of the company’s 450mm users visiting on a mobile device. Mobile search and display ad revenues also grew over 100% year-over-year.
Scott Burke, Yahoo’s SVP of Advertising Technology, was a key executive sponsor of this transaction.
Yahoo is acquiring Flurry for a reported price tag between $200 – $300mm.
Transaction Value: $200 – $300mm
TV/Invested Capital Multiple ($73mm) 2.7x – 4.1x
Independent competitors include Localytics, App Annie, Apsalar, Motally, mtiks, Countly. Appsee and Upsight (fka Kontagent).
Flurry fits well with Yahoo’s existing business focus, specifically across mobile, advertising and B2B products. While Yahoo builds its own apps and app inventory, and sells advertising across those properties, the company is acquiring a service that could become the go-to platform for other mobile players to measure and monetize their own app businesses. Flurry’s analytics are used by 170,000 developers globally, and the deal will give Yahoo important strategic insights into how various apps are used on the 1.4 billion mobile devices on which Flurry is integrated.
Architect Partners’ Observations
Yahoo’s blog post trumpeted this deal as a way for Yahoo to deliver ever-better consumer app experiences. But the real value seems to be in gaining a toehold on mobile devices and access to mobile ad inventory on smartphones. The math here is curious – 170,000 developers use Flurry (free) for analytics, but only 8,000 use Flurry to monetize their apps through in-app ads.
Flurry’s revenues are unknown, but CEO Simon Khalaf said last fall that the company was cashflow breakeven. He hinted at a possible IPO at that time.
Yahoo is way behind Google and Facebook, which combined own 2/3 of mobile ad revenues. But this transaction is a modest step towards making Yahoo more relevant in mobile.