Yahoo acquiring digital ad company BrightRoll for $640 million

Yahoo is acquiring the digital ad company BrightRoll for $640 million in an attempt to try and boost the company’s revenue after years of lackluster financial results.

It is the first major acquisition by Yahoo since it sold it’s stake in the Chinese e-commerce service Alibaba Group Holding Ltd. for $9.4 billion.

Yahoo says that it will distribute more than half of the $6.3 billion in after-tax proceeds from the Alibaba sale to its shareholders.

This gives CEO Marissa Mayer the chance to look around at potential acquisitions that could make the California based tech company more profitable again, as it has lost market share from Google in the online ad market.

Brightroll is a San Francisco based digital video advertising service that automatically places ads in videos on PCs and mobiles.

Since its inception in 2006 the company has built strong ties with some of the largest advertisers in the US, generating over $100 million in annual revenue.

This seems to be a step in the right direction for the company. Mayer’s last purchase was Tumblr, which Yahoo acquired for $1.1 billion, however, the company hadn’t proved it could generate revenue.

BrightRoll is a very profitable company though, with revenue well ahead of Tumblr.

Mayer published a blog post on Tuesday, in which she said:

“Acquiring BrightRoll will dramatically strengthen Yahoo’s video advertising platform,”

Investors were quick to react to the news, with Yahoo stock gaining 5 cents in extending trading.

BrightRoll could be Yahoo’s answer to competing in display advertising.

Yahoo’s display ad revenue declined by 4 percent in the first nine months of 2014 compared to last year. Meanwhile, ad revenue at Google has been increasing by over 20 percent on quite a regular quarterly basis, with more companies spending money to make their business have an online presence.

In 2011 Yahoo had a worldwide ad market share of 3.9 percent, this has since dropped down to only 2.4 percent, according to eMarketer. Facebook has increased its ad market share from 3.6 percent in 2011 to around 8 percent this year, and Google boasts a 32 percent ad market share.

Yahoo still owns 384 million shares of Alibaba stock, worth around $44 billion. These holdings are one of the only reasons that the company’s stock has been at one of its highest levels in decades.