If Rocket Fuel‘s acquisition of its competitor, X+1, is approved by regulators, it will fill a gap in the demand-side platform’s offering and perhaps brighten its outlook as a publicly traded company as clients continually shift how businesses operate in the programmatic space.
The deal is valued at approximately US$230 million, with Rocket Fuel paying $100 million in cash and providing 5.4 million shares of its common stock.
Rocket Fuel’s demand-side platform (DSP) services allow advertisers to manage their programmatic buying across online ad exchanges and other supply sources. X+1 competes in the same sphere, but is known for its integrated data management platform (DMP), which enables marketers to collect and analyze a large body of data to improve audience targeting.
“In an ecosystem where data costs can eat up a large percentage of digital media spend, it is no surprise that Rocket Fuel is looking to capture more share of total budgets by collecting those data fees, and the margins that go with them,” said Matt Sauls, co-founder of Toronto-based DSP SiteScout, in an interview with Media Post. “With this goal in mind, an established player like X+1 is one of the few options for mature DMP technology.”
Many in the industry also believe X+1′s direct relationships with advertisers will help Rocket Fuel shed its reputation as a “black box” operator; the company’s competitors are increasingly leaning away from Rocket Fuel’s “managed” business model to allow clients more direct control over their buying.
In July, Rocket Fuel made its platform available to North American agencies and advertisers on a self-serve basis for the first time, signaling that it too sees where the industry is heading and is adjusting its model. In a release on the X+1 acquisition, Rocket Fuel said the merger would accelerate its “entry into the digital enterprise marketing [software-as-a-service] market.”
The deal was announced Aug. 5, the same day Rocket Fuel announced its quarterly financial numbers. While much of the financial news was good ($92.6 million in revenues, a 70% increases year-over-year, and an 85% increase in new customers) the company revised its full-year revenue expectations below Wall Street’s consensus estimate. As a result, investors ignored the X+1 news and dropped the company’s value by more than 20% in after-hours trading.