Technology giant Yahoo said it will buy digital video advertising service BrightRoll for $640m (£402m).
The move would allow Yahoo to grow its video advertising platform, "making it the largest in the US", the firm said.
BrightRoll does automated online video advertising for some of the world's biggest brands and its net revenue is expected to exceed $100m this year.
A jump in video advertising would also help offset Yahoo's slowing growth and boost declining display ad revenues.
"Here at Yahoo, video is one of the largest growth opportunities, and BrightRoll is a terrific, strategic and financially compelling fit for our video advertising business," said chief executive Marissa Mayer in a statement on Tuesday.
Last month, Yahoo had reported that its third quarter revenue from ads fell by 5% from a year earlier. It has struggled to keep up with rivals like Google that have seen ad revenue grow by 17% in third quarter from a year ago.
The acquisition is also Yahoo's first major purchase since receiving $9.4bn in September from selling part of its stake in Chinese e-commerce giant Alibaba.
News of the takeover comes after reports in October that said Yahoo was close to investing millions of dollars in mobile messaging startup Snapchat.