How the Yahoo acquisition saved Flurry from an uncertain fate (exclusive)

Not a surprising exit

Exact details of the Flurry acquisition haven’t been publicly disclosed by Yahoo or Flurry. But Amazon and AOL were also reportedly interested in buying Flurry. When it was leaked, and then announced, that Yahoo had pulled the trigger, many in mobile analytics weren’t surprised.

After all, Operaworks had recently acquired AdColony, and Twitter picked up TapCommerce, with more buyouts reportedly on the way.

“There have been rumors for months that Flurry was about to be acquired either by Yahoo or AOL, and so for many in the industry, the announcement didn’t come as a major shock,” the first source, close to Flurry executives, said.

“The price tag was not a major surprise to those close to the company because of the position the company was in,” this source added.

What hit Flurry hard, VentureBeat has learned, was when Apple began taking a harder line on incentivized ads in 2011. These are ads that offer rewards to those downloading apps and games, for example. Incentivized ads had become somewhat of a cash cow for Flurry, and then Apple changed the rules for developers in the App Store, eliminating the incentives. TapJoy was one of the first big victims of this, and it trickled out, affecting Flurry.

“This was a major source of their advertising spend, and Apple said no more incentivized ads. These ads had high margins, and incentivized ads were very successful, but then they went away,” this same source said.

In the end, the acquisition is a win for Yahoo, which picks up an analytics powerhohuse — and for Flurry, which gains a corporate parent capable of keeping those server farms running.

But the big payout for Flurry executives has been somewhat mitigated because of money the company owes to its investors, such as VC firms Draper Fisher Jurvetson, Interwest Partners, Crosslink Capital, and Menlo Ventures, all of whom participated in a $12.5 million round in December 2013.

Typically with venture-backed deals that end in acquisition, outside investors (who hold preferred stock) get their money first, often leaving a much smaller windfall for employees and other holders of common stock.

The previous year, in 2012, Flurry raised another $25 million from VCs, a crucial infusion that kept company doors open, sources told VentureBeat.

A shot in the arm for Yahoo

And without question, the deal marks a big step up for Yahoo’s mobile ad business. Yahoo chief executive Marissa Mayer had been saying for some time that the Sunnyvale, Calif.-based Yahoo was a “mobile-first” player. And Flurry’s data will definitely give a leg up to Yahoo as it monetizes further the approximately 800 million users in its customer base.

“Yahoo isn’t paying for the Flurry ad revenue, they’re paying for the data. They’re paying for a big footprint in mobile data,” the source close to Flurry executives said.

After the Flurry deal, a few of the bigger, privately owned players in the analytics space, including Tune (formerly known as HasOffers), Kochava, and Upsight (formerly Kontagent-Playhaven), have reportedly fended off buyout attempts.

Whether the integration between the two companies will go smoothly has yet to be determined.

“No question Yahoo is bullish on mobile, and the deal is certainly interesting. What this does is give Yahoo a strong ad network. So yes, this is a key consolidation in the mobile ad ecosystem,” said Kochava’s chief executive Charles Manning.

“Yahoo is giving strong attention to making this a success. Execution speaks volumes in resulting revenues. But it could hurt them if they don’t take advantage of the strong momentum in mobile,” Manning said.

Manning added: “There’s a saying: buying a company is easy to do, but hard to integrate.”