Qihoo buys MediaV to market online
Antivirus software developer Qihoo360 Technology isn't the first strategic investor to hold talks with MediaV. Several Chinese internet giants, including Tencent Holdings and online retailer JD.com, had pitched the advertising and digital marketing firm on a potential acquisition since the end of 2013.
According to iResearch, China's online advertising industry was worth RMB110 billion ($16 billion) last year, up 46% from 2012. It is an area into which strategic investors want to spread their wings - and the fact that Qihoo managed to close a deal for MediaV suggests its motivation is stronger than most.
In the last quarter of 2013, Qihoo's online advertising revenues came to $142.4 million, accounting for 64% of total income. The firm was bullish about increased monetization of its platform and the contribution from search and mobile advertising. However, Qihoo still trails Baidu. During the same period, the search giant posted $1.56 billion in online marketing revenue.
The MediaV acquisition is intended to close this gap. Qihoo plans to combine its high volume user base and traffic in PC and mobile internet with MediaV's advertising technologies, creating a powerful advertising e-ecosystem, Hongyi Zhou, Qihoo's chairman, said in a statement.
Founded by Jiongwei Yang, formerly of Allyes Online Media, which was acquired by Silver Lake in 2011, MediaV provides cloud-based big data analysis services that enable clients to deliver advertising to targeted audiences.
"It's very important for merchants to market their products to the right group of consumers," says Jixun Foo, a managing partner at GGV Capital, which just closed its fifth Sino-US VC fund at $622 million. "MediaV has built its behavior-targeting system from existing online traffic to help improve advertising efficiency."
The company has raised three rounds of funding from Lightspeed China Partners, GGV and Soros Fund Management-affiliated Quantum Strategic Partners since its launch in 2009. The VC investors made a partial exit as Qihoo acquired 50-60% of MediaV. Foo draws similarities with travel website Qunar. When Baidu bought a majority stake in the site in 2011, VC backers GSR Ventures, Mayfield Fund, Tenaya Capital and GGV retained an equity interest.
"Exiting to strategic investor is like a double-edged sword - it may limit our upside potential compared to a public market exit but it still provides an alternative means of selling our portfolio," Foo says.
GGV's interest has fallen from 15% to less than 10%. A full exit will come through public market sell-downs, with MediaV preparing for an IPO in the US within two years. The company has yet to turn profitable but revenues jumped 500% year-on-year in 2013. Foo expects growth of at least 300% over the next two years.
"No Chinese advertising technology company has listed in the US. MediaV will be one of the first movers in this segment," he adds.
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