With its acquisition of Jumptap, Millennial Media adds expertise in programmatic buying, third-party data and performance marketing as it looks to build a mobile advertising powerhouse capable of holding its own against Google as well as quickly-growing Facebook.

Millennial Media said this week that it is acquiring Jumptap for approximately $200 million. While mobile advertising continues to grow rapidly, Millennial, Google, Facebook and others have struggled to prove they can effectively monetize mobile as the cost for smartphone ads is typically significant less than on desktop.

?This is a major move for us,? said Mollie Spilman, executive vice president of global sales and marketing at Millennial Media, Baltimore, MD. ?When you combine Jumptap?s real-time-bidding technology and strong performance business with Millennial Media?s leading brand business, the result is a really compelling solution for advertisers.

?From an industry perspective, too, when you combine two of the top four companies in the space, that is certainly going to have a noticeable impact on the overall market,? she said.

?Jumptap complements Millennial Media in a number of ways that will let us improve our current position. For example, we are a leader in utilizing first party data, while they are a leader in third party data partnerships. We have one of the top brand businesses in mobile, while they have one of the top performance businesses in mobile.?

Shift in strategy
The deal was announced on the same day that Millennial Media reported its second-quarter earnings, revealing that sales grew 45 percent for a total of $57 million, which fell short of analysts? expectations.

The market did not respond positively to either piece of news, with Millennial Media?s stock value falling 16 percent Wednesday morning, its biggest drop in six months.

Overall, Millennial Media?s stock value has dropped almost 50 percent since it went public in March 2012.

Jumptap had itself planned a public offering of stock and raised $121.5 million in financing last year to help it accomplish this goal but clearly reconsidered this strategy, possibly recognizing that it could accomplish more teaming up with Millennial than on its own.

In some ways, the deal with Jumptap is a surprise for the brand-focused Millennial Media.

?It's big news for Millennial and a big shift for their strategy,? said David Siemer, founder of media and technology investment banking firm Siemer & Associates, Santa Monica, CA. ?Publicly, Millennial has been rather negative about the performance side of advertising and the associated lower margins and eCPMs.

?Their embrace of this ad type is likely driven by the rise of online DSPs/RTBs and the pressure the online branded advertising networks are seeing, which has lead to a drastic and continuing decline in eCPMs,? he said.

Integration a challenge
The focus on performance marketing does not necessarily bring with it any significant upside in terms of driving profits.

?The challenge with performance marketing is very low barriers to entry - so those companies aren't able to sustain high market valuations,? Mr. Siemer said. ?If Millennial shifts to a more performance based model, I'd expect to see a huge decline in their market cap.?

Integrating the two platforms could also bring some challenges.

Given the challenges presented by the deal, it appears that scale is Millennial?s main goal here.

?The two sides aren't necessarily a natural fit - very different advertiser value propositions,? Mr. Siemer said. ?The advertisers for the two platforms likely have very little overlap, so the sales synergies will not be high, at least not initially.

?There are at least 50 companies with similar technology as Jumptap, so the only way this makes sense is if Millennial is really going for scale,? he said.

Programmatic buying
Jumptap?s experience in programmatic buying is clearly one of the attractions for Millennial Media.

Programmatic buying, including real-time bidding, is quickly growing in mobile and attracting a greater share of ad budgets because it provides more control for advertisers targeting a specific audience.

However, one result of the quick growth in mobile advertising has been the entry of numerous new players trying to grab a piece of the pie.

By partnering with Jumptap, Millennial Media also hopes to offer the kind of size and scale that will ensure it remains a competitive option.

?As the space has hit and moved beyond its inflection point, growth is exploding and new mobile networks, DSPs and technologies are coming out of the woodwork on a daily basis,? said Wade Rifkin, vice president and group media director at DigitasLBi, New York. ?Millennial and Jumptap are two of the longest standing and most established networks, so the consolidation here creates somewhat of a monolith in mobile advertising.

?This will make it harder for upstarts to come in and enter the network/programmatic space and easier for agencies and brands to tap mobile context and audience data at scale,? he said.

Enhanced targeting
Millennial Media is already a significant player in mobile advertising.

A recent report from Siemer & Associates found that Millennial Media has a 16.7 percent share of the United States mobile ad market, putting it in second place behind Google, which has a 23.8 percent. The next biggest player is Apple with a 15.1 percent share.

Jumptap, which has a significantly smaller 3.2 percent share, reportedly reaches 218 million mobile users in the U.S. with its ads.

By joining forces, Millennial Media and Jumptap will also be able to better deliver targeted ads to users.

?Millennial has been a lead voice in the marketplace for years, despite the fact that their main competitors either are owned by an operating system or are Facebook,? said Mr. Rifkin said. ?Despite that, Millennial has aggressively rooted itself via integrating and partnering with apps, and that bet paid off with mobile apps now commanding 80 percent of time spent on mobile.

?The Jumptap acquisition complements this, funneling more third party data and targeting opportunities over to Millennial,? he said.

?While the new entity still lacks the first party data to the degree that Apple, Google or Facebook have, the data cloud created by this merger represents an incredibly rich and powerful data repository that can appeal to a wide breadth of brands.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York