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Yahoo acquires platform Luminate to bolster ailing ad business

The Internet giant buys another company, as Alibaba, the Chinese giant in which Yahoo has a large stake, moves closer to its blockbuster IPO.

Yahoo is trying to turn around a display-ad business that slumped 7 percent last quarter. Richard Nieva/CNET

Yahoo has acquired the startup Luminate, a service that focuses on advertising on top of online images, as the Internet giant tries to give its once-mighty ad business a jolt.

The service shut down earlier this week, and terms of the deal were not disclosed. TechCrunch earlier on Friday reported the news. Yahoo confirmed the acquisition to CNET.

The company, founded in 2008 in Mountain View, Calif., is an ad network with more than 180 million users and more than 6 billion image views each month, according to Luminate's website. The service lets marketers layer product, display and text ads over images.

"We are thrilled to be joining Yahoo, where we can continue to bring innovative experiences to an even larger audience," Luminate CEO James Everingham said in a blog post.

The acquisition is just the latest of CEO Marissa Mayer's more than 40 buyouts since she took the helm at Yahoo more than two years ago. The company has been looking to rejuvenate its advertising business, which has been in decline as younger competitors like Facebook have gained dominance in the online ad world. Last quarter, display revenue, an important financial metric for the company, fell 7 percent from the same period last year.

In February, the company introduced Gemini, a platform focused on so-called native advertising -- ads that fit in more with editorial content instead of being cordoned off like traditional ads.

The move also comes as Alibaba, the Chinese e-commerce giant in which Yahoo has a large stake, announced on Friday that it will price the shares in its upcoming initial public offering at $60 to $66. Yahoo, which has owned a 22.6 percent stake of Alibaba, will retain a 16.3 percent stake after the IPO, which is poised to be the biggest ever.

The Chinese company could raise up to $24.3 billion. That means Yahoo could rake in more than $8 billion before taxes, though the company has promised to return half of the IPO proceeds to shareholders. But the remaining amount could go toward funding more of Mayer's acquisitions.