Yahoo’s latest deal illuminates strategic shift

Yahoo’s reach for Luminate shines a light on its new M&A strategy. The purchase of the in-image advertising company marks Yahoo’s third ad-tech deal in two months, following a three-year hiatus from buying in that market – a time in which it has made at least 45 acquisitions.

Until recently, Yahoo’s purchases have been aimed at building out its content offerings, especially picking up mobile app products and the teams that built them. But now, three of its four latest targets (mobile ad network Flurry, antifraud vendor ClarityRay and Luminate) have brought it monetization tech. Ad tech has been a development focus internally, as well – earlier this year, Yahoo launched an effort to integrate its existing ad products in one place and launched Yahoo Gemini, which combines mobile search with native advertising and is the likely home for Luminate’s team and technology.

The big question is whether this trend will continue when Yahoo soon finds itself flush with another $8bn in cash from Alibaba’s pending IPO. We think it likely that it will. Given its declining display ad revenue and penchant for picking up video content (both organically and via partnerships) and video technology (with its recent acquisition of video distribution software company RayV), new technologies to monetize video and provide it with more sources of video ad inventory could be a target. However, in light of its talks to buy NDN earlier this year, we wouldn’t rule out another big content play.

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