Rocket Fuel Buys [x+1] in $230m Deal

Digital ad solutions firm Rocket Fuel Inc. is to acquire New York-based online audience targeting firm [x+1] for a neat $100m in cash plus 5.4m shares of its own common stock, valuing the deal at around $230m. Rocket Fuel also reported second quarter revenue up 70% year-on-year to $92.6m.

In results for the quarter ending 30th June, Rocket Fuel's gross profit rose 80% to $45.7m, and headcount grew by a similar amount, 77%, to 826 in the 12 months. The firm's end profits are currently hovering around zero: adjusted EBITDA showed a loss of $0.4m, compared to profit of $0.3m in Q2 2013.


Rocket Fuel says the acquisition will aid its expansion into the digital marketing enterprise SaaS market, via [x+1]'s highly rated DMP and DSP solutions; expand its solution suite into personalized digital marketing; and aid clients in making use of their first party data, in addition to giving it an established enterprise sales channel. The transaction is subject to regulatory approvals and conditions, and is expected to close by early in the fourth quarter of 2014. [x+1] CEO John Nardone (pictured) will become EVP and General Manager at Rocket Fuel.

Rocket Fuel Chairman and CEO George John said the proportion of business from the mobile channel grew from 26% to 31% in the quarter, and that the firm's new product launches were increasingly frequent, with recent examples being the AI-driven digital marketing hub Mission Control, video and display ad targeting tool Audience Guarantee, and Dynamic Personalized Ads, whose users can create 'a nearly unlimited number of ad variations.'

Of the [x+1] buy, John said: 'This combination brings together the leading Data Management Platform and the leading Artificial Intelligence-based Digital Advertising solution. We are strengthening our competitive position while significantly increasing our total addressable market and ability to deliver SaaS-based multi-channel solutions to advertising agencies and enterprise customers.'

Despite this buoyant outlook, the company warned that a number of industry trends had resulted in lower-than-expected advertiser commitment for the coming quarter and therefore downgraded its guidance for the full year to revenue $403.0 - 427.0m (including [x+1] in Q4) and adjusted EBITDA loss of $7-12m. Shares fell by as much as 25% on the news.

Web sites: www.xplusone.com and www.rocketfuel.com .