Beijing-based Spearhead acquires San Francisco ad platform Smaato for $148 million
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Image Credit: Spearhead/Smaato

This is the first such deal to go through in 2016. Others will likely follow

Offline marketing service provider Spearhead Integrated Marketing Communication Group has finished its acquisition of Smaato for $148 million this week, completing a process announced in June.

It’s Spearhead’s first such foray into the US. Significantly, of multiple American adtech companies looking into the China market, this acquisition is the first to clear the regulatory hurdles.

“Spearhead now opens the door for Chinese brands to run international mobile campaigns and reach high-value users as they expand their businesses abroad,” the company said in a press release. Looking at numbers given by Smaato CEO Ragnar Kruse in October, Spearhead is getting access to a firm with about 100,000 app developers signed on, 20,000 apps cycling through its gates per day, and 10 billion daily advertisements worldwide. Spearhead was first formed in 2003 and now offers a range of “advertising and PR communication, experiential marketing, digital marketing, content marketing and Big Data marketing.”

Smaato was founded in 2005 and became a major player in both the mobile and app spheres through its ad network mediation services. With overall digital advertising revenues starting to stagnate, and growth coming primarily from the largest entities, clients are increasingly competing for up-to-the-minute bidding. Smaato released a new SPX Management API over the summer, in order to automate more of the process for clients.

Prior to the acquisition, it had raised $43.1 million in four funding rounds up to 2014, led by Aeris Capital. Smaato expects to retain a high level of independence in its new configuration, and sees major growth in mobile, especially mobile video, despite the fact that app spending is still the larger share of the total.

Smaato also joined up with Google Exchange as its first mobile bidding partner last month, with the tech giant wanting to take advantage of its real-time “Dynamic Demand” bidding process. According to Smaato, the partnership “aims to increase competition, reduce latency and improve the overall user experience.”

Smaato Co-Founders Ragnar Kruse and Petra Vorsteher celebrated the company turning 11 this year. Photo Credit: Smaato

Smaato Co-Founders Ragnar Kruse and Petra Vorsteher celebrated the company turning 11 this year. Photo Credit: Smaato

As Tech Crunch notes, the deal is one of several big-ticket acquisitions by Chinese investors this year. These entities have cash to burn, and are focused on bringing in high-end data, ad, and mobile services to cater to a growing domestic market, and just as importantly, build an international footprint. Kruse previously told AdExchanger that, “In the next two or three years, I could see China bypass even the US when it comes to mobile ad spend, when you look at the smartphone penetration – 1 billion devices – and how dominant the mobile market is.”

Indeed, Smaato found that the Asia-Pacific market, driven by China, accounted for most of that region’s ad spend growth in 2016, even if the Americas are still well ahead. Smaato already has access to a billion users worldwide outside of China. Prior to the acquisition, it was already making moves into the Asia-Pacific with key 2015 hires. Kruse previously noted the difficulty of this initial approach, though, stating that, “Selling directly to an advertiser doesn’t exactly work, since (Chinese publishers) don’t have those partnerships abroad.”

Smaato will also be bringing to the table its fraud detection technology, which they announced last year. This technology has been made all the more urgent following a cyber security report from White Ops that a Russian forgery ring is costing legitimate mobile video advertisers $3-5 million daily, and that this figure may by no means be uncommon as scammers improve their tools worldwide.

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