Through this deal, VerSe aims to enhance its retargeting capabilities and full-stack advertising solutions to drive better programmatic performance outcomes and return on investment for its advertisers, the companies said in a statement on Wednesday.
The transaction is expected to generate an additional $100 million in revenue at 10% Ebitda margin in FY25 (Ebitda is earnings before interest, tax, depreciation and amortization). While the deal is a mix of cash and stock, the company did not disclose the value, or the stake acquired.
“By integrating Valueleaf’s data-driven insights with our ad tech platform, we anticipate a marked increase in advertising efficiency and effectiveness, driving higher-value partnerships,” VerSe’s co-founders Virendra Gupta and Umang Bedi said in the statement.
The development comes four months after VerSe clinched its largest-ever deal when it acquired US-based subscription service Magzter, marking its foray into the international markets and the premium subscription segment. The company has been actively acquiring as it looks to strengthen its core businesses, including news and infotainment, short videos and adtech.
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Historically, the company has funded its acquisitions using its existing cash reserves and has significant dry powder. Valued at about $5 billion, VerSe raised about $805 million in April 2022. It counts Goldman Sachs, Falcon Edge Capital, Sequoia Capital India, Omidyar Network India and Matrix Partners among its investors.
Founded in 2006 by Satish Saraf and Srikanth Bureddy, Valueleaf has built strong capabilities in programmatic performance marketing through its data management platform that captures user behavior of over 90% of online transactors. Programmatic refers to media buying and retargeting the ads towards that audience to drive a higher output.
Valueleaf has extensive supply-side integration across websites, apps and smartphones, and provides industry-focused solutions to different segments of advertisers.
In FY23, Valueleaf’s revenue from operations grew to ₹281 crore from ₹142 crore a year earlier. However, its net profit slightly narrowed to ₹11 crore compared with ₹12 crore in FY22, according to filings sourced by Tofler.
With this transaction, VerSe will leverage Valueleaf’s second- and third-party data insights on some of the largest performance vendors that include banking and financial services, gaming, e-commerce and other online digital companies, and will integrate it into its own advertising tech stack and data management platform.
To be sure, VerSe’s own platform NexVerse.AI also supports the company’s retargeting use case. Valueleaf’s offerings, which will be integrated into this platform, will further strengthen capabilities that would have otherwise taken at least two to three years to build in-house, according to Bedi. NexVerSe.AI, which is already generating revenue, is still in its early days, he said in an interview with Mint.
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The combined synergies of the two companies will enable VerSe to boost revenue, advertiser’s wallet share and average revenue per user (Arpu)—a closely watched metric for social media companies—while also expanding its market share. While the teams will work closely, the companies will continue to report their financials separately.
While the ad market has seen some slowdown over the last year, it is still growing at 10-15%, said VerSe founder Bedi as the company ramps up its digital marketing portfolio. With most of the money that has gone to performance advertising, he said this domain is slowly moving to programmatic ads. Bedi estimates that there are 50% higher conversions with retargeted ads as compared to those that are not targeted.
In FY23, VerSe’s operating revenue grew 51% to ₹1,456 crore while its losses narrowed to ₹1,910 crore from ₹2,563 crore in FY22. Meanwhile, the company has clocked a double-digit revenue growth and reduced its burn by more than half in FY24, Bedi said, without disclosing the exact figures as the company has yet to file its audited results.