As mobile media consumption and ad spending accelerates, online video distributor blinkx announced Tuesday its agreement to purchase mobile ad network Rhythm NewMedia for $65 million in an attempt to capture that smartphone and tablet growth. Read the release [pdf].
Blinkx’s acquisition strategy is predicated on building quick access to large networks of new publishers. The company began its acquisition path with the 2011 purchase of digital advertising solutions provider Burst Media and, six months ago, it acquired video ad platform Grab Media, which at the time had been considered by industry insiders as a Yahoo acquisition target.
Among the specific reasons for the acquisition of 8-year-old Rhythm, blinkx CEO S. Brian Mukherjee said in a statement that it was largely about building greater scale in mobile as well as ensuring the technology was there to take better advantage of the gains being made in that space.
From an even more practical standpoint, blinkx anticipates that the Mountain View, Calif.-based Rhythm also will provide a revenue boost, though the latter has lost money the past few years. Ultimately, with the added revenue and the combined back-office operations, blinkx is telling its shareholders the losses will stanched as Rhythm should break even within a year or so of the deal’s closing.
Rhythm claims its revenue has been growing more than 90% over the past three fiscal years at an average compound rate. Its most recent annual sales were $25.4 million and it is expecting 30% growth for each of the next two years. Yet while it has raised roughly $18 million in venture capital since opening its doors in 2005, it is posting a $4.6 million loss for its most recent fiscal year.
In addition to adding the mobile ad network’s’ 50 publishers to its distribution system, blinkx is also bringing on Rhythm CEO Ujjal Kohli and CRO Paul Bremer in “senior-level” positions. Pending the usual shareholder consent agreements, the deal is expected to close late next week.
