Contact: Scott Denne
Rocket Fuel built a business on delivering advertisers more clicks for fewer dollars, launching its revenue growth well beyond most other ad tech companies. That growth, however, is decelerating as its lack of a software offering and perceptions of fraudulent clicks on its service caused it to lower its guidance and carved away one-third of its stock price this morning. Now it’s picking up [x+1] in a $230m bid to solve its underlying problem: beyond the results it delivers, Rocket Fuel has little hold on its customers.
The target’s core offering is a data management platform on which advertisers mix third-party data with audience data gathered from their campaigns. Managing marketing data for customers (rather than just promising cheap clicks) will help Rocket Fuel build a case for longer contracts with advertisers, as well as enable the company to apply its artificial intelligence to other marketing applications, such as website optimization.
Rocket Fuel will burn up $100m in cash and $130m in stock ($100m after today’s drop) for [x+1], with an estimated trailing revenue multiple of just below 3x. That’s quite a bit lower than what [x+1]’s peers, such as Aggregate Knowledge and BlueKai, have fetched – mainly because a significant portion of [x+1]’s revenue comes from low-margin media sales, rather than licenses of its data management platform.
We’ll have a more in-depth report on this deal in our next 451 Market Insight.
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