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Yahoo (NASDAQ:YHOO) Acquires Video-Advertising Company

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Yahoo (NASDAQ:YHOO) had recently gained profits from Alibaba (NYSE:BABA)’s IPO. Yahoo (NASDAQ:YHOO) gained $9.4 billion by selling 140 million shares in Alibaba (NYSE:BABA)’s IPO, and the company almost immediately made use of that money by investing into a video-advertising company called BrightRoll. On Tuesday, Yahoo (NASDAQ:YHOO) became the owner of BrightRoll by paying $640 million in cash.

BrightRoll can help the CEO of Yahoo (NASDAQ:YHOO), Marissa Mayer in her pursuit of establishing ground for Yahoo (NASDAQ:YHOO) against its huge rivals, Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Mayer has been trying to gain revenues for Yahoo (NASDAQ:YHOO), which is facing a highly competitive market. Selling the shares in Alibaba (NYSE:BABA)’s IPO, and then investing in the video-advertising company; Bright Roll are the two biggest steps that Yahoo (NASDAQ:YHOO) had taken since Mayer became the CEO in July 2012.

Mayer said that BrightRoll is a terrific, strategic and financially strong fit for Yahoo (NASDAQ:YHOO)’s video-advertising business. She also said that the merger of the two companies will help into their rapid growth. Yahoo (NASDAQ:YHOO) can help BrightRoll, to reach out to more advertisers globally, which in turn can help Yahoo (NASDAQ:YHOO) by bringing its vast platform offering to Yahoo (NASDAQ:YHOO) advertisers.

According to researcher eMarketer, the company was once considered a leader in the market. As per July’s report Yahoo (NASDAQ:YHOO) generated less than 3% of online ad revenue last year. Google (NASDAQ:GOOGL) was ranked at the top with almost 32% revenue, and Facebook (NASDAQ:FB) generated 6% revenue. Microsoft (NASDAQ:MSFT)’s revenue also exceeded Yahoo (NASDAQ:YHOO)’s this year.

Although the video-add growth is not significant enough now, but it is there and will continue to grow in the future. Spending on web video ads is expected to soar 56% to almost $6 billion this year. The net digital ad revenue is expected to increase 17% to $140.2 billion.

Google (NASDAQ:GOOGL) has an upper hand in the web video ad sales market because of the extreme popularity of YouTube, which has a huge fan following. According to eMarketer, Google (NASDAQ:GOOGL) has about 19% of web video ad sales to its credit. Yahoo (NASDAQ:YHOO) is hoping to challenge Google (NASDAQ:GOOGL)’s sheer volume of videos, which are generated by users with professional video content produced by Katie Couric and tech reviewer David Pogue.

Yahoo (NASDAQ:YHOO), this year sold shares which were valued about $9 billion in the initial offering of Chinese e-commerce powerhouse; Alibaba (NYSE:BABA). The company then used that cash money to buy BrightRoll.

On Tuesday’s trading, yahoo (NASDAQ:YHOO)’s shares went down 1% to $49.05 and were static for hours until the company’s announcement of purchasing BrightRoll.

Whether Yahoo (NASDAQ:YHOO)’s investment in BrightRoll will benefit the company or not, and whether the company will be able to give competition to its rivals, such as Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB), is something that will be interesting to see. Yahoo (NASDAQ:YHOO)’s acquisition of BrightRoll does seem like a good investment and paying cash for the company is also a positive step that has been taken by the internet giant.

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