Dive Brief:

• Twitter is selling its MoPub mobile advertising network to game developer and ad-tech company AppLovin for $1.05 billion cash, the social network announced on Wednesday (Oct. 6).
• The deal is expected to close in 2022. Twitter acquired MoPub in 2013 for about $350 million to build out its mobile ad business and generate revenue before its IPO.
• The sale purportedly will accelerate development and growth of the company's owned and operated revenue products and aligns more broadly with Twitter's revenue goal of reaching $7.5 billion by the end of 2023, per the announcement.

Dive Insight:

Twitter has made a number of moves to shake up its business this year, including exploring new revenue streams that tap into the surging creator economy with features like Super Follows and Ticketed Spaces. By offloading MoPub, Twitter appears to be prioritizing monetization of its core offerings and can now refocus around a "massive" advertising opportunity amid its recent flurry of new product development, CFO Ned Segal said in the announcement.

Twitter bought MoPub for about $350 million in stock in September 2013 just before the company hit the public market. At the time, Twitter purchased the startup to build out its capabilities for selling ads through third-party apps and, more broadly, strengthen its ability to generate revenue from mobile ads. Since then, MoPub has increasingly become a source of revenue for Twitter, generating $188 million for Twitter in 2020, per the announcement. That represents nearly 5.9% of the company's 2020 ad revenue for the year. However, as concerns around privacy in digital advertising increase, Twitter may have seen MoPub's role as a broker between advertisers and third-party apps as a potential headache. 

MoPub has also been core to Twitter's automated ad exchange and currently works with 45,000 apps and 130 third-party ad platforms, per a company blog post. MoPub's marketplace serves more than 1 trillion app advertising requests monthly and reaches more than 1.4 billion devices. Twitter's data licensing and other revenue for Q2 2021 rose 13% to $137 million, "primarily driven by MoPub," according to a July letter to Twitter shareholders.

"This sale is another sign of the continued importance of connections across the mobile space but has the side effect of removing another independent player from the avenues advertisers can take to reach consumers," AdColony's Chief Revenue Officer Jude O'Connor said in emailed statements. "For an advertiser, there's a fine line between advertising with a partner that has multiple strengths you can leverage, and bidding into a completely vertically integrated, self-attributing black box."

AppLovin's business is split between games, which make much of their money from selling virtual items, and marketing tools that other game developers use for app promotion. For AppLovin, this week's deal promises to improve transparency around pricing and data for in-app ad bidding, boost ad revenue and help advertisers reach new audiences, according to a document for investors.

Twitter's shares rose more than 2% in extended trading on Wednesday, while AppLovin shares jumped more than 8%. The social media company said it will share additional details about the deal's projected financial impact when it reports Q3 earnings on Oct. 26.