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TEL AVIV, June 30 (Reuters) - Israel-based Perion Network agreed to buy Grow Mobile Inc of San Francisco for up to $42 million in cash and equity to expand its offering for mobile application advertising.
Perion said on Monday $17 million in cash and equity will be paid at closing and up to an additional $25 million in cash and equity may be paid over the next two years, contingent upon reaching certain revenue and profit milestones.
Grow Mobile's platform enables developers of mobile applications to buy and track campaigns to boost the number of users.
The mobile advertising market is expected to see "explosive growth in the coming years", but is fragmented and inefficient, Perion said. A developer seeking to advertise a mobile app must connect to numerous traffic sources.
"Once you get a lot of traffic you need to get revenue," Perion Chief Executive Josef Mandelbaum told Reuters.
Perion's technology helps developers distribute their apps and make money off them through advertising. It competes with companies like IAC/InterActiveCorp, Blucora Inc and Israel's ironSource.
"We are all very strong on desktop. None of us is strong in mobile," he said. "Our biggest focus right now is mobile."
Grow Mobile was founded less than two years ago and is profitable. This past year, it managed advertising campaigns in excess of $20 million with triple digit year-over-year revenue growth in the last quarter. Grow Mobile's clients include Walmart and Zynga.
The deal, due to close in the third quarter, will be accretive to Perion's 2014 financial results.
Perion has forecast 2014 revenue of $460-$470 million and net income of $103-$108 million, up from revenue of $104.6 million and profit of $20.1 million in 2013.
The forecasted surge in revenue and profit is due to its acquisition in January of the much larger ClientConnect business from Israel's Conduit in an all-stock deal worth $660 million.
ClientConnect, which had revenue of $325.5 million and net profit of $86.7 million last year, brought Perion a platform to give mobile app developers a way of improving their distribution and money making capabilities. (Reporting by Tova Cohen)