Yahoo acquires, shuts down Luminate to rejuvenate ad business


In just 20 months since she joined Yahoo! as CEO, Marissa Mayer has already approved 37 acquisitions for the company. Several more were added in 2014, with Luminate being the most recent one.

The deal was announced in a blog post by Luminate CEO James Everingham. Luminate has been in business for six years, starting with the goal to revolutionize images for advertisers and publishers. The company developed a platform that more than 10,000 publishers use today, generating incremental revenue thanks to contextually relevant targeted ads.

"We are thrilled to be joining Yahoo where we can continue to bring innovative experiences to an even larger audience. A million thanks to all that have joined us on our incredible adventure: our customers, our experts, our investors and our friends and family," wrote Everingham.

Luminate actually started in 2008 as Pixazza. As a start-up, it was able to raise just under $29 million, receiving funding support from investors like Ron Conway, Nokia, Google Ventures, and August Capital. The company's expertise in leveraging images in advertisements will come in handy as Yahoo! toils to revive its advertising business which fell 7 percent last quarter in terms of display revenue compared to the same period in 2013. However, Luminate is being shut down.

Everingham's blog post said in-image services have been stopped as of Sept. 3, with the Luminate JavaScript snippet ceasing its function on all sites it is used on. Sites that have earnings over $10 will receive final payments by the end of September. Luminate Direct advertisers will be refunded balances by the end of the month as well. Log-in access will remain available for all Luminate advertisers, publishers, and experts until Oct. 1.

Yahoo! announced Gemini in February, a platform focusing on what is known as native advertising which yields ads that are more in line with editorial content. Maybe Yahoo! doesn't want Luminate itself but only the smarts the company's team has.

Still, the deal makes sense on Yahoo!'s end, according to R. Ray Wang, an analyst for Constellation Research. Google has been using technology similar to Luminate and results have been nothing short of excellent so it can't hurt to follow suit. "Luminate created an interesting model that was pay-per-performance-based. There's three things at issue here. Image-text ads, full-display ads and product ads. Luminate are really good at this and have a high click-through rate. This really is a smart acquisition," said Wang.

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