Rocket Fuel acquires [X+1] for US $230 million, adds programmatic capabilities

What: Advertising technology company Rocket Fuel has acquired ad tech company [x+1] for US $230 million in cash and stock, to add new capabilities, in a deal that should close in the Q4 of this year, according to a company's statement.
Why it matters: Rocket Fuel will benefit from [x+1]’s strong data management, demand-side platform, and site-side optimization features that will all help the company to address the agency and marketer trends .

descarga (5)The advertising technology company Rocket Fuel has acquired ad tech company [x+1] for US $230 million in cash and stock, to add new capabilities.  [x+1]’s tools allows doing programmatic marketing across multiple sites and devices. The deal should close in the fourth quarter of this year, the company said in a statement.

Rocket Fuel will benefit from [x+1]’s strong data management, demand-side platform, and site-side optimization features.

“The addition of [x+1] will allow Rocket Fuel to expand its portfolio of solutions to a larger addressable market.Through this merger of talent, we will be able to offer our customers a comprehensive platform to more easily leverage their growing digital data assets. Our combined technologies will deliver exceptional results across the spectrum of online and offline channels,” Rocket Fuel CEO George John said in a statement.

Rocket Fuel will benefit from [x+1]’s strong data management, demand-side platform, and site-side optimization features.

In addition to this acquisition, Rocket Fuel's second quarter earnings were announced reporting revenue less media costs of US $54.7 million – 84% higher than Q2 2013. The company, however, in order to repelled any confluence of negative trends suggested that agencies and advertisers are directing more ad spend to trading desks or to direct partnerships with demand-side platforms and avoiding exchange buying due to concerns over botnet traffic and advertisers and agencies managing programmatic spend directly using software. Using new data-driven methods to deliver ads to the right people across more devices should help Rocket Fuel increase revenues.

On the company's earnings, Rocket Fuel CEO George John said that agencies and marketers have begun to spurn insertion order-based media buying and to reduce spend with intermediaries that add layers between buyers and sellers of media. But the speed of the transition may have caught Rocket Fuel somewhat off guard.

Rocket Fuel shares fell in after-hours trading, down more than 23 percent.

How does Rocket Fuel benefits from [x+1]?

Although Rocket Fuel already offers programatic media-buying tools,  [x+1] offers a data management platform (DMP) that can take data from third-party sources into consideration together with customers’ own data sources, in order to deliver ads to the right audience.

[x+1] offers a data management platform (DMP) that can take data from third-party sources into consideration together with customers’ own data sources, in order to deliver ads to the right audience.

[X+1] offers a Software-as-a-Service (SaaS) based suite consisting of data-management platform (DMP), demand-side platform (DSP) and website optimization ; and a  managed services-based media business similar to that of an ad network. The former will in part help the company to address the agency and marketer trends .Another thing that [x+1] offers is its enterprise focus with strength in sales, professional services, customer service and documentation.

Despite New York-based [x+1] started in 1999 its' 2013 revenue was only about US $72 million, including media costs. (Rocket Fuel did not break out revenues ex-TAC.) That's up from approximately $60 million in 2012. [X+1]'s 2014 revenues are expected to be about $86 to $90 million.These are relatively small numbers compared to Rocket Fuel second quarter revenues mention above, and considering that its’ total managed revenue, including media costs, will be about US $420 million this year.

So, the revenue impact of [x+1] acquisition will have on Rocket Fuel's business might be less than expected, after all. But the deal could fit into the larger shift to self-serve programmatic.

"We're acquiring [x+1] as a way to inject enterprise software and SaaS DNA into Rocket Fuel. [X+1]'s know-how around enterprise software will be a powerful complement to our capabilities in achieving … results," John said.


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