With a $485 million deal, a little-known Needham company has vaulted to the top of a crowded field of tech firms that distribute and track commercials across all screens, from whopping TV sets to tiny smartphones.
Extreme Reach Inc. has grown rapidly in just the past few years, fueled by big brands such as Ford and Geico that use its technology to digitally distribute ads to television stations, or to make them pop up at the right moment on YouTube and Hulu.
Now, Extreme Reach has agreed to buy the TV ad delivery business of Digital Generation Inc. of Irving, Texas, taking out a rival in the crowded ad tech marketplace.
“There are dozens, if not hundreds, of ad tech companies competing,” said John Roland, Extreme Reach chief executive officer. “When we are combined with DG, and we have $300 million in revenue, that makes us bigger than many of the other competitors combined.”
The deal is just one of the latest in a string of acquisitions in the advertising technology sector.
On Tuesday, mobile ad company Millennial Media Inc. agreed to pay about $225 million for Boston mobile marketing start-up Jumptap Inc., and last week AOL said it would buy the online ad platform Adap.tv for $405 million.
And this is just the beginning of a major consolidation, said Roland. His company expects to acquire others in the near future, and would consider an initial public stock offering in the next 12 to 18 months.
“People will start to hear about us quite a bit going forward,” Roland said.
Extreme Reach has grown to 225 employees and recorded revenue of about $60 million. It delivers some 120,000 commercials to TV stations a month, and since it was founded in 2008 has sent billions of ads to online video services.
A key reason for its growth is that Extreme Reach is among the few ad tech companies that can seamlessly distribute video to all media, said Andrew Frank, an analyst with Gartner Inc. “Extreme Reach has identified a relatively unpopulated, yet crucial niche,” he wrote about the company.
The ad tech sector is made up of small start-ups and big companies alike that are coming up with new and more effective ways for advertisers to continue to reach their target audiences as more viewers use a variety of devices and services to view video content.
Companies such as Extreme Reach not only help clients get commercials on a multitude of devices, they also have sophisticated tools for tracking viewer behavior across the Web to determine where ads will be most effective online.
In fact, many of these ad tech companies are in the Boston area. Local start-ups such as DataXu Inc., Nexage Inc., and Celtra Inc. have attracted millions in venture capital dollars and are hiring dozens of engineers and developers.
The Extreme Reach deal to buy Digital Generation’s TV division comes just three months after it received $51 million in funding from Boston private equity firm Spectrum Equity, which acquired a minority stake in the company. Spectrum will invest an additional $47 million to fund the acquisition.