More consolidation afoot in the world of mobile ads. Perion, the publicly-listed mobile app services company that was the subject of a reverse merger by Conduit’s Client Connect business last year, is today announcing an acquisition to further build out its marketing business: it’s buying the young (but profitable) ad aggregation platform Grow Mobile.
Tel Aviv-founded Perion is paying $17 million up front ($10m in cash, $7m in equity), plus up to another $25 million in cash and equity over the next two years based on performance targets. The deal is expected to close in early Q3.
Grow Mobile will become a part of the company’s new Lightspeed mobile marketing division. For now its standalone product will continue as is, but ultimately, the plan is to integrate Grow Mobile into a bigger platform that Perion is building.
“We are in a closed beta of a dashboard that will give the app developer connectivity to different supply sources under one dashboard,” GM Tomer Pascal tells TC.
This sounds like it will bring together some of the tech that Grow Mobile has built (more on that below) along with some of Perion’s existing tech, for example around search, so that users can break down and track campaigns down to specific keywords to see where installs are coming from and revenues from individual traffic sources.
“Today to do that kind of thing you have to work with three different systems,” he says.
Grow Mobile’s three co-founders, Brendan Lyall, AJ Yeakel and Minglei Xu, as well as the rest of Grow Mobile, are all joining Perion.
Grow Mobile was launched almost exactly a year ago with the three founders respectively hailing from Zynga, Storm8 and Wild Needle (which was sold to Zynga). The idea was to create a platform for any app maker to acquire users just like big-name gaming companies do.
The result was a dashboard that brings in 75+ different marketing sources, including ad networks, ad exchanges and more, where app publishers can plan their media campaigns, spend their marketing budgets and then track the results.
The one-stop-shop model has proven to be a success. Customers include GREE, Gameloft and Blackflip, among others. Perion says Grow Mobile is already profitable, on advertising campaigns “in excess of $20 million.” It also claimed triple digit year-over-year top-line growth last quarter.
The only funding that Grow Mobile has disclosed since launch is a $1 million seed round from Bessemer Venture Partners and Signia Venture Partners.
The bigger mobile trend at play in this deal is ongoing consolidation in the world of mobile marketing. Smaller players are coming together, and big fish are eating smaller-but-promising fish to achieve better economies of scale and bolt on more technology.
Consolidation is the theme being played up by Grow Mobile, too. “This agreement is a milestone event for Grow Mobile,” said Lyall, Grow Mobile’s CEO, in a statement. “Today we are part of something bigger.” Perion says that before Grow Mobile, it already processes over 1 billion queries, 12 terabytes of data and 1 billion ad impressions monthly.
Opera’s acquisition of AdColony last week for up to $350 million also plays into this trend.
Ironically, Grow Mobile’s aggregation platform is a useful way for the still-fragmented marketplace to remain so, offering developers and publishers an easy way to purchase across all channels available to them. For app publishers who like the idea of one-stop-shop convenience but also like having a choice of marketing options and to encourage competition in the market among exchanges and networks, Grow Mobile has created a way to bring both of these together.
For Perion specifically, the move comes in the same month as a few other currents move through the business.
For starters, Perion went through a rebranding and repositioning earlier this month to focus more on B2B services. Prior to the Conduit merger, Perion was an umbrella company for different mobile apps of its own that included Incredimail (a unified messaging app), Smilebox (photo sharing) and SweetIM (an IM app), as well as other B2B offerings, with the biggest being a search engine installed as a browser toolbar for third parties, which is its biggest source of revenue today.
After it merged with Conduit’s Client Connect division in October 2013, Perion expanded further into mobile app monetization services, which are now part of the “Lightspeed” division. (The remaining part of Conduit, which offers an app building platform among other things, continues as a standalone business.)
Second, Josh Wine, the Conduit exec who ushered the merger and became the president of Perion, quietly left the other week “effective immediately.”
“We are going in a new direction,” Lightspeed GM Tomer Pascal explained to me.
Third, the move to expand Perion’s monetization businesses with a profitable startup comes at a moment when the company is trading at the lower end of its 52-week range. Perion combined is currently valued at just under $676 million. Just before Conduit finalised its merger with Perion, Perion was valued at $153 million. (Google Finance seems to keep calculating the market cap without factoring in the Conduit stake and values Perion at just under $126 million based on that share price.)
Some speculate that the lock up for shares post the Conduit reverse-takeover, which will expire July 3, will impact this further, and there are also concerns that the company is not integrating or leveraging its new app monetization direction fast enough. In that regard, the Grow Mobile news seems to be timed specifically to offset that kind of negative spin, and show that Perion is staying the course.
That same report also noted that talks between Perion and another potential acquisition, AirPush, had stalled because the price was too high for Perion. We had heard that the deal was being negotiated at $170 million.