Yahoo said it will buy digital video advertising service BrightRoll for $640m.
Yahoo said it wants to strengthen its video advertising platform, "making it the largest in the US".
BrightRoll provides automated online video advertising services. Its net revenue is expected to exceed $100m in 2014, which Yahoo hopes will boost the financial performance of its own video advertising operations.
By aggregating advertising publishers into a unified network, BrightRoll enables advertisers to buy online video advertising at scale, across many sites.
Yahoo said the acquisition will accelerate its strategy to focus on search, communications and digital content through growth in mobile, social, native and video advertising.
"Video – along with mobile, social and native – is driving a surge in digital advertising,” said Marissa Mayer, chief executive of Yahoo (pictured).
“Here at Yahoo, video is one of the largest growth opportunities – and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business."
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Mutual advantage for Yahoo and BrightRoll
Mayer said the acquisition will accelerate the growth of both companies.
“We can help BrightRoll scale to even more advertisers globally, and they can bring their tremendous platform offering to Yahoo's advertisers,” she said.
“The combination builds positive momentum for Yahoo's broader display advertising business in 2015.”
In October 2014, Yahoo reported its third-quarter revenue from ads fell 5% compared with the same period in 2013.
Analysts said Yahoo is struggling to keep up with rivals such as Google, which saw third-quarter ad revenue grow 17%, year-on-year.
Yahoo’s share of the $43.1bn US digital advertising market fell to 5.8% in 2013, according to eMarketer, and is expected to dip again in 2014.
Latest Yahoo acquisition
The BrightRoll acquisition is Yahoo's first major purchase since a cash injection of $9.4bn in September 2014, from selling part of its stake in Chinese e-commerce firm Alibaba.
The acquisition is also the second largest under Mayer’s leadership, after the acquisition of blogging service Tumblr in a $1.1bn deal announced in May 2013.
Yahoo said it expects the deal to close in the first quarter of 2015, and that BrightRoll will continue to offer its current suite of products and services after the acquisition.