An adtech takeover can help China's smaller tech players sidestep the industry's giants. A search firm, a gaming outfit and two private equity firms are bidding $1.2 billion for Norway's Opera Software, in China's latest sizeable outbound M&A deal.
Despite a fat premium, the offer is not overly pricey. Plus, Opera could help its new potential owners move into lucrative advertising-technology niches not yet taken by Baidu, Alibaba or Tencent.
Search and antivirus specialist Qihoo 360 and mobile-gaming company Beijing Kunlun Tech are leading the all-cash deal for Opera, best known for its mobile browser, with financial backing from Golden Brick and Yonglian, two investment houses.
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Buying the Norwegian company would give the $9-billion Qihoo, itself midway through a buyout, and the smaller, Shenzhen-listed Kunlun access to the 350 million users of Opera's browser.
However, Opera's mobile advertising platform is the prize asset. Revenue here grew an impressive 41 per cent year-on-year to $145.4 million in the three months to December - making up 75 per cent of the company's total. It now expects overall adjusted EBITDA of $100 million to $125 million for 2016, on the back of strong growth from its video advertising platform.
The lure for Qihoo and Beijing Kunlun is obvious. Online advertising in China is growing fast. Analysys forecasts total spending by advertisers will hit 375 billion yuan ($57.1 billion) by 2018, up from 265 billion yuan in 2016. But some areas are already dominated by one or more of the big three: for example, Baidu takes about 80 per cent of search advertising revenue, iResearch reckons. Opera can help Qihoo and Beijing Kunlun sing a different tune.
