Opera and Skyfire marry data compression with video optimization in $155M merger

Before this week, you may have been forgiven for thinking of Opera as a worthy but dull and fading player in the browser space. No longer. Not only has the Norwegian firm caused quite a bit of upset by dropping its own engines and frameworks in favor of WebKit, Chromium and V8, but now it’s gone and bought Skyfire for a cool $155 million.

From a consumer app perspective, the two companies have remarkable similarities. Opera’s browsers are best known for using server-side compression as a way of saving on data costs, and Skyfire uses server-side rendering for video, making it a go-to browser for those who really miss Flash on today’s platforms. This deal is doubtlessly about uniting those two strengths, but that’s not its main thrust.

This is really about mobile carriers: about offering them more control over the quality of their services, and about giving them ways to monetize their subscribers’ mobile web usage. And it may just be a push whose time has come. The key there is the carriers’ current shift to software-defined networking (SDN), which in itself is intended to give operators the ability to fine-tune parts of their networks in ways that were not previously possible.

As it happens, Skyfire offers operators a video optimization technology called Rocket, that is supposed to free up capacity – as much as 60 percent, the company claims — at cell sites that are currently feeling the strain of the mobile video explosion. Skyfire also has a toolbar called Horizon that carriers can preinstall on their phones in order to offer customers context-relevant coupons, for example. Mountain View-based Skyfire has three deals with U.S. carriers for the Rocket Optimizer and Horizon (Verizon(s vz) was a big investor), and is apparently trialling them with ten other operators around the world.

Opera, meanwhile, has its Turbo compression technology, but it also has a mobile advertising platform called Mediaworks and a carrier service called Web Pass, which allows them to offer pay-per-use mobile web access through the browser. Across these two companies, there’s a lot to play with –- in terms of both technology and geographical reach (Skyfire is strong in North America and Opera in the developing world).

As Opera CEO Lars Boilesen put it in a statement:

“Both companies have evolved far beyond their browser roots. Skyfire adds capabilities to our portfolio around video, app optimization, smartphones and tablets, and strength in North America. With video expected to consume over two-thirds of global mobile bandwidth by 2015, and as time spent on Android and iOS apps explodes, we are excited to extend Opera’s solutions for operators.”

In the same statement, Skyfire CEO Jeffrey Glueck (who will hang onto that title while also becoming Opera’s Operator Business Unit EVP) said:

“Opera practically invented cloud compression to improve mobile user experience, and the team at Skyfire is proud to join forces and advance cloud solutions together. Opera’s over 100 carrier relationships, global sales team, and delivery organization can accelerate the global commercialization of Skyfire’s technology. Opera’s Mediaworks advertising unit with AdMarvel, Mobile Theory and 4th Screen Advertising will strengthen Skyfire Horizon by offering mobile operators a complete turnkey solution including ad optimization, ad sales, and rich analytics. The synergies across all the product lines for both companies are tremendous.”

Glueck also wrote a separate blog post that’s worth a read. In it, he expresses excitement about pushing Skyfire’s technology into the developing world, and also gives a nod to the rise of SDN:

“This is a major milestone for our Skyfire family and validation of our vision for cloud computing and network function virtualization (NFV) to solve huge problems on mobile networks, from handling the explosion of video over cell towers, to finding ways for mobile operators to regain relevance and monetize in an over-the-top world. Back in 2007, when Nitin Bhandari and Erik Swenson started Skyfire, the idea that Tier One mobile network operators would entrust the cloud for core network roles was considered bleeding edge. Now it’s a topic everyone is talking about, and Skyfire is making NVF combined with Software Defined Networking a reality.”

So what’s next for the merged companies? For a start, they will out new products for carriers over the next year that build on Web Pass with new ways of offering mobile web access, such as “toll-free data” and “ad-supported data”.

And by the way, if you love your Flash video and you’re worried about the future of the Skyfire browser, don’t be – Skyfire will continue to develop and support it.