Mobile advertising and data provider Millennial Media Inc. (MM) recently received the green signal from the U.S. Federal Trade Commission (FTC) for the acquisition of privately-held mobile advertising platform Jumptap, Inc. With the regulatory approval, the transaction is likely to form a behemoth in its category with complementary product offerings, operating synergies and technological collaboration to serve a wide spectrum of customers across the globe.
Headquartered in Boston, Jumptap is a premier mobile advertising platform reaching over 218 million mobile users in the U.S. and over 439 mobile users globally. It boasts more than 124 million unique and data-rich profiles, of which about 44 million can be reached across both mobile and online platforms.
According to market research firm International Data Corporation, Jumptap was the second-largest advertising platform in the U.S. with 10.7% market share in 2012 behind Millennia Media at 18%. Jumptap is an industry pioneer in forging strategic partnerships with over 20 third-party data providers that has enabled it to focus on audience-centric advertising program through its 76,000 mobile sites and apps. In addition, to ensure a holistic coverage of the mobile advertising market, it has issued 55 patents and another 50 patents are awaiting approval.
In concurrence with the agreement, Jumptap shareholders will receive approximately 24.6 million shares of Millennial Media, which is equivalent to approximately 22.5% pro forma ownership post transaction.
In addition to the stock component, the deal also has a minor cash component aggregating a maximum of $12 million (based on Millennial Media’s closing share price on Aug 9, 2013). The exact stock and cash composition will be determined at the closing of the transaction based upon Millennial Media's share price at that time.
The Key Takeaways
The product portfolio of the combined entity compliments well and that is likely to result in economies of scale in the fast-growing mobile ad market. Jumptap has a strategic presence in the Real-time bidding (:RTB) segment with over 2 billion impressions per day to deliver app and other performance campaigns. RTB is a method of selling and buying online display advertising in real time one ad impression at a time. In addition, Jumptap brings on board a focused presence in performance advertising with healthy cross-screen solutions, intellectual-property portfolio and strong business partnerships providing third-party data that complements Millennial Media’s first-party data assets.
Millennial Media has over 450 million unique user profiles, which are utilized by advertisers to target specific ad campaigns. By integrating Jumptap’s third-party data with its indigenous data sources, the combined company will have relatively enriched data asset to drive better results for both brand and performance advertisers. With its tie-up with 24/7 Real Media, Jumptap also has cross-screen advertising solutions that facilitates advertisers to run ads across mobile devices and PCs. This gives Millennial Media a fair pie of TV ad market and extends its customer reach across the international arena.
Jumptap’s patented assets further improve the intellectual property portfolio of the merged entity. These patents encompass broad aspects of the delivery and targeting of mobile advertising and put the combined company in an elite class. In addition, Jumptap also augment the human capital of the new company with senior-leadership team and skilled technicians of app developers and programmers.
For mobile advertisers and agencies, the combined company will provide arguably the largest and comprehensive audience solutions with unrivalled brand and performance capabilities. The merged company will deliver market-leading data, video, rich-media, cross-screen, programmatic bidding/buying and measurement solutions for an informative decision-making exercise with better analytics, relevancy and performance-driven resources.
For mobile developers and publishers, the new entity will offer easier access to a larger pool of managed, self-service and programmatic tools to monetize inventory more efficiently and effectively.
Millennial Media had earlier set four priorities for growth initiatives this year, which included an easier method to buy and transact on its platform, expanding proprietary data assets, delivering effective advertising across different mobile devices and global expansion. The Jumptap acquisition is an effort on this endeavor. Jumptap is a strategic fit to Millennial Media and post-integration, the company expects incremental revenues on an immediate basis.
Since its inception in 2006, Millennial Media has created a niche market through innovation and a diligent focus on mobile advertising platforms. The business model of the company hinges upon sophisticated data and technology, solid partnerships with global media and application developers across all operating systems, and healthy relationships with leading global brands. We remain encouraged with the industry consolidation and expect Millennial Media to reap huge benefits from the acquisition.
Millennial Media has a Zacks Rank #3 (Hold). Other notable companies in the industry that warrant a look include MDC Partners Inc. (MDCA), ABM Industries Incorporated (ABM) and Publicis Groupe SA (PUBGY), each carrying a Zacks Rank #2 (Buy).