Ad Net Undertone Acquired By Perion, Israeli Performance Marketing Company

perion-undertoneAd tech might not be as sexy a buy as it was just a few short years ago, but that didn’t stop Israeli performance advertising company Perion from buying American ad net Undertone on Tuesday for up to $180 million in cash.

Of that sum, $91 million is payable at closing and the remaining $89 million will be paid over time. Perion also will assume $50 million in Undertone debt. Read the release.

The deal comes amid a marked acceleration of ad tech consolidation, including the acquisitions of well-known ad network companies such as Millennial Media, Chango and TellApart in recent months. Undertone’s sale is unique in that it belongs to an earlier generation of media platform, having been founded 14 years ago with a focus on desktop display advertising. Its all-cash acquisition at a high valuation may offer a ray of hope to some other ad network companies that predate the rise of programmatic advertising and that would likely entertain an offer – companies like Exponential and Collective.

The question is, are there more acquisitive companies like Perion waiting in the wings?

“In the public markets today, ad tech is not looked upon favorably,” said Perion CEO Josef Mandelbaum. “We take the opposite approach. We’re running right toward that.”

Part of the allure is that Undertone – which wasn’t looking to be acquired, according to CEO Corey Ferengul and co-founder Eric Franchi – was profitable. “The scale and profitability of Undertone was unique,” Mandelbaum said. “Most ad tech companies aren’t profitable and don’t have that scale.”

But Undertone also fills a hole in Perion’s business, which needed a better foundation in ad tech – namely brand, agency and publisher relationships. Perion had been moving into ad tech in increments. In February, for instance, it completed its purchase of Paris-based app monetization platform MakeMeReach, which it intended to add to the app promotion platform Grow Mobile, acquired in summer 2014.

So while Undertone will continue to run as its own unit, with no management changes (Ferengul will join Perion’s senior staff), Mandelbaum expects a more unified offering a year from now, focusing on optimizing engagement for brands and agencies and on delivering branded search and unique ad formats on the publisher side.

The first big step in reaching that goal will be merging each company’s data assets. “We’re sitting on a different perspective on the consumer and consumer behavior,” Ferengul said. “So how do we put that data together to give us an interesting advantage from a data standpoint? Then how do you make sure of that to bring that to market?”

Perion’s background in affiliate search gives it a lot of intent-based marketing data. Its recent mobile-related acquisitions give it engagement data in that space as well. “Where there’s mobile app engagement, we have more reach there than Undertone – as well as in social,” Mandelbaum said. “We’re Facebook, Twitter and Instagram partners and we can use that data within their rules and regulations.”

Undertone has sought to differentiate by providing elaborate, engagement-driven ad units. Its data asset includes information about what causes a consumer to engage with ads, who watches video and who is most likely to click through on a direct-response unit. “If I can understand what sort of intent the consumer has, and I know what capabilities cause a consumer to engage with an ad, I have a very elaborate view of the consumer,” Ferengul said.

Both Perion and Undertone have been acquisitive lately (Undertone bought rich-media startup Sparkflow in June), and Mandelbaum says that will continue.

“We’ll do organic and inorganic investments to help build up [the vision],” he said. “We want to be synonymous with high-quality advertising solutions.”

While Mandelbaum wouldn’t specify which companies it has its eye on, if any, he said Perion will look to accelerate in tech and data, as well as in unique ad formats. “We’re not looking to play in standard display,” he said. “We’re looking to build upon what Undertone has done, which is standout creative experiences.”

Edit: Some of the financial aspects were initially misrepresented in the article. They’ve been corrected. AdExchanger regrets the error.

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1 Comment

  1. Peter Gasparini

    I’m confused, how does debt assumption reduce proposed (total) acquisition price?