Allison Schiff contributed.
The fat lady hasn't sung, but it appears likely that a group of Chinese companies will acquire Opera and its lucrative mobile advertising business.
Oslo-based Opera told investors Wednesday that it had received a buyout offer of $1.2 billion led by investment fund Golden Brick Silk Road, along with security software player Qihoo and Beijing-based mobile gaming company Kunlun, also known as Kalends. (Kunlun ponied up $93 million for a majority stake, 60%, in gay dating app Grindr in January.)
The company's board has recommended shareholders take the offer.
Opera includes Opera Mediaworks, a mobile ad network reaching more than 1 billion users that operates as a subsidiary of the software company most widely known for its desktop and mobile browser products.
A smorgasbord of acquisitions live under the Opera Mediaworks brand, including AdColony (mobile video ad network); AdMarvel (mobile ad serving); AdVine, Mobile Theory, Apprupt and 4th Screen (mobile ad networks); Skyfire Labs (mobile video optimization); Hunt Mobile Ads (mobile monetization); and Handster (mobile app store platform).
Mediaworks is the bulk of Opera’s business. The mobile ad tech’s Q4 2015 revenue was $145.4 million, and total company Q4 revenue was $193.5 million. The Chinese contingent is likely more interested in Opera’s mobile ad chops rather than its browser business.
Compare that to Millennial Media before it got snapped up by AOL. In Q2 2015, Mediaworks saw nearly $93 million in revenue. During its final earnings report as a standalone company in Q2 2015, Millennial reported $65.8 million in revenue for the quarter.
Opera Mediaworks has seen particular growth in mobile video advertising. Its Q4 2015 revenues comprised 60% of all revenue for the platform, versus 50% in Q4 2014.
“There is no hotter market than video right now,” said newly minted Opera Mediaworks CEO (then AdColony CEO) Will Kassoy, addressing analysts at an Opera investors day event last March.
The company, whose client list includes a number of large brands, including McDonald’s, Coca-Cola, P&G, Mondelēz and BMW, also claims to be the monetization partner for 25,000 apps and websites, and partners with some very large players – including AT&T – to supply data.
Opera Mediaworks also claims to facilitate an enormous portion of global mobile ad spend, roughly $1 billion in 2013. Mobile ad spend is set to hit roughly $100 billion worldwide this year.
Although it’s unclear what will happen to its brand relationships, it seems plausible that the acquisition will give existing Opera Mediaworks clients direct hooks into China, where mobile Internet-based ad spend is set to hit nearly $14 billion this year, almost double what it was in 2014.
“We know from our work in China that globalization is a huge focus for many of the major Chinese companies which are looking to grow their user base abroad after they reach market dominance at home,” said Omer Kaplan, CMO and co-founder of app discovery platform ironSource. “It’s possible that for Kunlun, Opera’s strength in global distribution presents a compelling benefit as they look to overseas growth.”
The deal would give Opera direct access to the Chinese user bases of both Qihoo and Kunlun. In turn, Kunlun and Qihoo would have the opportunity to take advantage of Opera’s mobile ad platform and to cross-sell their products and services to Opera’s browser user base of around 350 million.
“There is strong strategic and industrial logic to the acquisition,” said Opera CEO Lars Boilesen in a statement. “We believe the consortium, with its breadth of expertise and strong market position in emerging markets, will be a strong owner of Opera.”
International expansion into new markets been a particular focus of Opera for some time.
“When we started moving into emerging markets about five years ago, we worked with operators to get people online, and now as we work with these operators, we have access to their billing platform to generate transactions,” said Nuno Sitima, SVP of strategic partnerships at Opera Software, at the 2015 investor event. “We can do this because of one very simple thing: If you have an Opera app on your device, there is a connection between that and our server, a tunnel between the device and our cloud.”
If the Mediaworks deal goes through, a conglomerate of Asian firms will presumably have a strong command of the global mobile ad market – and the necessary tools to compete with Facebook, which doesn’t have much of a presence in China.
“Unbeknownst to most people, we’re the company behind the scenes facilitating a lot of the mobile advertising commerce,” Opera Mediaworks’ former head of global ad sales, Scott Swanson, told AdExchanger on the heels of the completion of the AdColony acquisition in July 2014. “Going forward, we want 100% of our revenue to come from mobile.”