Brief:

• Private-equity giant Blackstone Group is acquiring Vungle in a deal that will give the mobile video advertisement startup stronger financial backing for future growth, per an announcement shared with Mobile Marketer. The deal values Vungle at about $750 million, an unnamed source told The Wall Street Journal.
• Co-founded in 2011 by Zain Jaffer, Vungle provides a video ad platform for more than 60,000 publishers of mobile apps including Rovio, Zynga, Pandora, Microsoft and Scopely. The company raised about $30 million in venture capital with investments from Crosslink Capital, GV (formerly Google Ventures), Uncork Capital and 500 Startups, according to PitchBook Data.
• As part of the deal, Vungle reached a settlement with Jaffer, who had sued the company for wrongful termination. Vungle had placed Jaffer on leave after he was arrested by local authorities and charged with child abuse in 2017. The San Mateo County District Attorney’s Office later dropped the charges after concluding that Jaffer had suffered a psychotic episode triggered by a cocktail of prescription drugs, Bloomberg News reported.

Insight:

The reported $750 million deal for Vungle is a key indication of the explosive growth in mobile video advertising, considering that the company received a fraction of that amount in venture capital backing. Vungle said it serves more than 4 billion video views a month on more than a billion unique devices, providing thousands of app developers with ad revenue. The company hasn't cited revenue figures since 2017, when it was on track to reach an annual target of $300 million, Venture Beat reported.

Mobile video ads in 2018 made up 63% of digital video revenue, which jumped 37% to $16.3 billion from the prior year, according to the IAB's Internet Advertising Revenue Report. The report echoed previous research indicating that brands planned to boost spending on video and that consumers are open to viewing ads in exchange for free digital video. U.S. adults this year will spend more time using their mobile devices than they'll spend watching TV, researcher eMarketer forecast, supporting the growth in mobile video advertising.

By reaching a settlement with Jaffer, Vungle also can move past a scandal that had rocked Silicon Valley for the past couple of years. It's not clear that Jaffer would have prevailed in his $100 million wrongful termination suit, which hinged on a part of California's labor code designed to protect people who have been cleared of criminal charges, Bloomberg News reported. Jaffer also sought to acquire Vungle and change its leadership, TechCrunch reported, citing a leaked document. "I tried to acquire Vungle last year with the backing of a different group of private equity buyers," Jaffer said in a statement after the Blackstone deal announcement. "The exit strategy was to take Vungle public or sell to a strategic like Amazon, but for five times the price that was reported today. The new buyers seem smart and will probably do exactly that."