BlueLithium provides technology that enables websites to match adverts with the interests of their users, it was set up in 2004.
Yahoo boss Terry Semel quit the company in June after concerns about the firm's direction, however Yahoo has made several purchases in an attempt to make up the ground on Google.
They recently purchased online advertising exchange Right Media for $700 million.
New boss, Jerry Yang, is trying to make Yahoo more attractive to advertisers after the company's profits have fallen in each of the past six quarters.
Speaking to the BBC, Mr Yang commented on the recent acquisition, "BlueLithium's products, technology and team will be an integral part of our drive to build the industry's leading advertising network."
The company will help to maximise Yahoo's online expenditure. The firm employs 145 staff at 10 locations in the US.