Somoto Expands into the Field of Video Advertising: Acquires Israeli Video Advertising Network Terser-Tude

The scope of the transaction is up to NIS 14 million in cash and shares, subject to milestones

Jan 14, 2016, 06:40 ET from Somoto

TEL AVIV, Israel, January 14, 2016 /PRNewswire/ --

Somoto (TASE: SMTO), offering software distribution solutions and applications, targeted advertising and monetization for Apple Mac, Android, iPhone (iOS) and PC-Windows environments, today announced the acquisition of Israeli digital advertising network (ad-network) Terser Tude Ltd. (Terser), specializing in video advertising solutions and in particular video for mobile, which constitute 65% of its activity.

Terser offers advertisers and content owners monetization solutions for mobile and desktop-based solutions from video advertising directly with providers of advertising space on the Internet or through third-parties. The company, which was established in 2014, and started to generate significant revenue during 2015, has about ten active clients and partnerships with dozens of advertising agencies and digital exchanges.

Terser's revenue for the first ten months of 2015 amounted to NIS 11.8 million, with an operating profit of NIS 2.5 million (22% of revenue). In Somoto's estimate, Terser's revenue in the fourth quarter of 2015 is expected to be approximately NIS 9 million, with an operating margin of approximately 23% of revenue.

The total consideration for the transaction, subject to various milestones, is up to NIS 14 million in cash and shares (approximately US$3.6 million), out of which the amount depends on the net profit of Terser in 2016, representing approximately 75% of the total consideration of the transaction. On the closing date, a total of approximately NIS 2.1 million in cash will be paid, and Terser will become a fully-owned (100%) subsidiary of Somoto. A total of up to approximately NIS 940 thousand in cash, contingent on Terser's results of 2015, will be paid to the existing shareholders of Terser in March 2016.

The remainder of the payment of up to approximately NIS 10.8 million, in Somoto shares and cash, subject to milestones (the Earn Out) and based adhering to net income of NIS 10 million during the Earn Out period, beginning November 2015 is expected to be completed at the end of 2016. Additionally, under the framework of the agreement, Somoto will provide Terser, upon completion of the transaction, a loan in the amount of NIS 2.61 million.

The digital video advertising market is currently experiencing strong growth due to increasing advertising budgets shifting from traditional fixed line channels such as television to digital channels, Internet and Mobile. According to market research, in the US alone the volume of video advertising on mobile is expected to grow 5-fold between 2015 and 2020, at a rate of 40% per year, totaling US$6.5 billion. By 2020 the size of the global advertising and the mobile Internet market is expected to be over US$25 billion.

Ben Giron, CEO of Somoto, said: "The field of video advertising, especially video on mobile is currently experiencing a significant transition of advertising budgets from television to the Internet. The Terser acquisition is consistent with the growth strategy of Somoto in the mobile field, where we see a significant growth engine, in particular in the field of video, along with our return to growth in the field of Apple Mac and our increasing profitability. The technology and unique knowledge of Terser brings impressive levels of revenue and profitability, and established strong relationships with advertisers and quality advertising space providers, which we believe have the potential for further significant growth. I congratulate the employees of Terser in joining our group. Their experience and knowledge, combined with our capabilities and marketing technologies, will be the basis of Somoto's capabilities in the area of mobile video. "

Mr. Giron added, "We continue to diversify the sources of our revenue and growth areas, so that in 2016, about 50% of Somoto's consolidated revenues will come from the mobile video space, through implementing our strategic plan in expanding through mergers and acquisitions."

Terser was founded by a group of Israeli entrepreneurs and today is managed by Jonathan Barkan, CEO who brings extensive operational experience to Terser. Terser's employees will engage key positions in Somoto in the field of mobile and video, and will contribute their knowledge and experience to continue the strategic expansion of Somoto in this area.

About Somoto Ltd. 

Somoto was founded in 2009 and is engaged in the marketing, distribution, development and automatic intelligent installation (Smart Installer) applications from advertisers, various monetization solutions and solutions for tracking and reporting for applications installation for the personal computer (PC) on Windows, Mac and mobile devices (mobile) environments, using advanced technology developed by the company. The company operates through a large number of publishers and distributes thousands of different applications, including the management of installations of tens of millions of applications a month. The company has agreements for distribution of applications in diverse fields with dozens of active clients, including various alternative customers.

The company develops, through its subsidiary Genio Innovation Ltd., personalization technologies that allow effective Internet advertising through maximum exposure to the user and precise adjustment of products and services by taste and specialized solutions for distribution and monetization for the Mac environment. The company's flagship product, Smart Homepage has won Innovation Awards, and is a news page with custom content based on user preferences employing unique artificial intelligence technology, and is patent protected in the United States. The company generates revenues through users' search queries, as well as through the homepage and smart advertising on this page.

Prior to the transaction, the Group has 40 employees, including 22 employees engaged in development.

For more information about the companies:

Forward-looking information 

The Company's estimates which appear above and below, and in particular, the Company's assessments in connection with its prospects and results of operations, its expected investments, its financial position, business strategy, goals and management plans (including development plans and objectives relating to the company's products and services) and the realization of its business plans, are considered forward looking statements as defined under the law, based on a number of assumptions regarding the Company's operational performance, business strategy, its current and future environment and the Company's business, which the Company expects to operate in the future as well as information received from the Company's business partners.

All forward-looking statements are intended to reflect the Company's expectations concerning future events, as of the date of this notice. These estimates may not be realized in whole or in part, or may materialize in a substantially different manner than anticipated by the Company. The company will not be responsible for any future changes that might occur and shall have no liability to update any changes of circumstances, future events or conditions with respect to forward-looking information about the Company's estimates are based above and below. Also, it is hereby clarified that the Company's performance in the past cannot be the basis of the Company's performance in the future.

Assi Itshayek, Chief Financial Officer
Tel.: +972-73-2300100