Acquisitions

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

2022 Acquisitions

Business Combinations

MoPub—On January 1, 2022, the Company completed its acquisition from Twitter, Inc. of certain assets that comprised of its MoPub business for a total purchase price of $1.03 billion in cash. The acquisition allows the Company to integrate certain product features of the MoPub platform into MAX, our own in-app mediation platform, and migrate publishers and demand partners from the MoPub platform to MAX. The Company accounted for the acquisition as a business combination. The Company recognized $12.8 million and $1.6 million of transaction costs in general and administrative expenses during three months ended March 31, 2022 and the year ended December 31, 2021, respectively.

The following table summarizes the preliminary allocation of the purchase consideration to the fair value of the assets acquired (in thousands):


	As of March 31, 2022


Intangible assets
Advertiser Relationships—estimated useful life of 9 years	$	212,700
Publisher Relationships—estimated useful life of 9 years	123,300
Developed Technology—estimated useful life of 5 years	61,800
Tradename—estimated useful life of 3 months	60
Goodwill	632,472
Total purchase consideration	$	1,030,332

The fair values assigned to the assets acquired are based on the Company's best estimates and assumptions as of the reporting date. No liabilities were assumed in the transaction. The Company has completed a preliminary valuation and expects to finalize it as soon as practical, but no later than one year from the acquisition date.

The income approach was used to determine the preliminary fair value of the advertiser relationships, publisher relationships, developed technology and tradename. Goodwill represents the excess of the purchase price over the preliminary fair value of identifiable assets acquired at the acquisition date and is primarily attributable to

the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, an estimated tax deductible goodwill of $694.5 million was generated as a result of this acquisition.

Contemporaneously with the signing of the asset purchase agreement, the Company entered into an agreement for Twitter, Inc. to provide certain transitional services to facilitate the migration of publishers and demand partners to MAX during a three-month transitional period following the closing of the transaction (the "TSA"). The Company accounted for the TSA as a transaction separate from the business combination since it was negotiated primarily for the benefit of the Company. During the three months ended March 31, 2022, the Company recognized total expense of $7.0 million related to the transitional services, which was included primarily in cost of revenue in the Company's condensed consolidated statement of operations.

The Company’s condensed consolidated statement of operations for the three months ended March 31, 2022 includes revenue generated from the MoPub business during the transitional period of $44.1 million. However, due to the significant integration of the MoPub business with MAX, it was impractical to determine the impact of the acquired business on earnings.

The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company and the MoPub business for each of the periods presented as if the MoPub business had been acquired as of January 1, 2021 (in thousands):


	Three Months Ended March 31,
	2022		2021
Revenue	$	625,421	$	640,800
Net loss	(99,932)		(23,831)

The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):


	Three Months Ended March 31,
	2022		2021
A decrease (increase) in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results	$	60	$	(12,922)
A decrease (increase) in expenses related to the TSA	$	7,000	$	(7,000)
A decrease (increase) in expenses related to transaction costs	$	12,848	$	(12,848)
A decrease (increase) in income tax provision	$	(4,564)	$	7,500

Asset Acquisitions

During the three months ended March 31, 2022, the Company recognized total earn-out costs of $31.7 million related to asset acquisitions closed in 2021 and prior. These earn-out costs increased the book value of the acquired mobile Apps, and are amortized over the remaining useful life of the originally acquired mobile Apps. No other asset acquisition was completed during the three-month period ended March 31, 2022.

2021 Acquisitions

Asset Acquisitions

During the three months ended March 31, 2021, the Company recognized total earn-out costs of $31.9 million, of which $27.5 million and $4.4 million related to asset acquisitions that closed in 2020 and 2019, respectively. These earn-out costs increased the book value of the acquired mobile Apps, and are amortized over the remaining useful life of the originally acquired mobile Apps. No other asset acquisition was completed during the three-month period ended March 31, 2021.