Rocket Fuel Powers Up With [x+1], Buys DSP/DMP Hybrid For Roughly $230M

Marking further industry consolidation, programmatic ad platform Rocket Fuel on Tuesday announced its intention to acquire [x+1], a demand-side platform (DSP), for approximately $230 million.

Rocket Fuel will acquire [x+1] in a cash and stock transaction, per a release. Rocket Fuel will pay $100 million in cash and roughly 5.4 million shares of Rocket Fuel.

[x+1] also has a data management platform (DMP), meaning that Rocket Fuel is buying both media-buying technology and data storage technology (and data) in one fell swoop. Mark Zagorski, CEO of eXelate, another DMP, believes the acquisition “exemplifies the continued emphasis on data and data management solutions as the key part of the marketer solution stack.”

“The addition of [x+1] will allow Rocket Fuel to expand its portfolio of solutions to a larger addressable market,” stated George John, chairman and CEO of Rocket Fuel. “We look forward to welcoming the [x+1] employees, with whom we share a passion for solving tough problems for our customers, to our team.” 

John Nardone, CEO of [x+1], will step into the role of executive vice president and general manager at Rocket Fuel.

“We are all very excited about adding the [x+1] team and products,” said Richard Frankel, president at Rocket Fuel, in the company’s Q2 earnings conference call. "We believe this transaction makes our company much stronger," he said, adding that it moves the company in the direction clients want it to go -- particularly in regard to data management and content optimization features.

The news comes on the same day as Rocket Fuel’s Q2 2014 earnings report. The company saw its revenue grow 70% and its gross profit grow 80% year-over-year. The company had revenue of $92.6 million in Q2 2014, and gross profit of $45.7 million.

Despite these growth figures, shares of Rocket Fuel have tumbled nearly 25% after hours. The company reported a net loss of $9.8 million and revenue missed projections. It attributes the Q2 miss to "tighter control of client spend by the agencies' internal trading desks and a shift toward direct licensing by advertisers, as well as recent customer concerns about inventory quality on exchanges that impact the entire industry."

The company has lowered its revenue projections for the second half of 2014 and expects to see revenue between $96 and $100 million in Q3 2014. Its full-year revenue projection is now between $403 million and $427 million, down from $420 million to $435 million.

Rocket Fuel plans to close the [x+1] transaction “as quickly as possible,” per a release. The company’s Q2 earnings report notes that the transaction is expected to close in Q4 2014. Once the deal closes, Rocket Fuel expects [x+1] to account for $18 to $22 million of revenue, per quarter.

The ad tech industry has seen a flurry of ad tech M&A activity in the past month, including this Rocket Fuel and [x+1] deal, Facebook's purchase of LiveRail, RTL Group's majority stake purchase of SpotXchange, Taboola's acquisition of Perfect Market, LinkedIn's purchase of Bizo and Yahoo's acquisition of Flurry.

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