Yahoo Acquires Video Advertising Platform BrightRoll for $640 Million

Struggling to catch up to Google and Facebook in Web ad sales, Yahoo has acquired BrightRoll to better compete in the rapidly growing video advertising space. In recent months, CEO Marissa Mayer has been realigning Yahoo's advertising strategy to position content building as one of the company's key priorities and emphasize advertising revenue as the primary path to monetizing that content. With banner advertisements tapering in effectiveness and video advertising gaining traction, it was only a matter of time before Yahoo made a bold acquisition, analysts agree.

For Mayer, who has been trying to "reinvent Yahoo" as a content company with rich original video offerings, the move is a risky one, but one that may pay off in a major way, according to Holger Mueller, principal analyst at Constellation Research. From hiring high-profile news anchor Katie Couric to headline an online news program to considering the conversion of Tumblr into a more video-centric platform, Yahoo is serious about developing its own video content. Now, the challenge is engaging users not only by "converting them from content consumers into content producers," Mueller says, but also by driving relevant interactions with ads, Brent Leary, partner at CRM Essentials, adds.

"The popularity of Internet video is completely disrupting not only our TV viewing habits, but how we consume information in general. [Yahoo's] acquisition just reaffirms the importance of video to getting and keeping consumer's attention long enough to form meaningful relationships with them. Integrating video ad networks into engagement strategies will be a necessity in the not-too-distant future if you want to successfully compete for people's attention," he adds.

According to Constellation Research's founder and principal analyst Ray Wang, video advertising will be a $9.8 billion market by 2015, thanks to the growing popularity of online video content. But in addition to rapid growth, the space is undergoing other changes as well. For example, the battle for ad positioning will increasingly move from open auction to private deals, Andrew Bloom, senior vice president of strategic business development at Sizmek, a multiscreen ad-serving platform, says. And because it's in flux, the market is currently a tough one to be in—there is "lots of competition out there from newly minted behemoths like Facebook and Liverail and more established players like Google," he says.

Still, both vendors and analysts in the space say video advertising technology is becoming a crucial part of business. "Today you must keep up with the latest technologies and meet your customers where they are. And they're all at that same place. They're looking for video," Mary Lou Song, CEO of Fuel451, a video advertising platform, says. "This acquisition absolutely validates the importance of having a video advertising strategy for businesses and brands. I believe what Yahoo believes—that video advertising is a must for every business of any size."

"[BrightRoll] gives Yahoo an opportunity to catch up on both the technology and the talent in this space," Wang adds.

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