Yahoo! has partnered with the ad company before but said that owning the company's technology will help it deliver solutions to a broader range of advertisers and integrate Dapper's ad serving into its key platforms.
Yahoo! said Dapper's capabilities will help accelerate the adoption of its Smart Ads targeting platform. The ad service automatically converts campaign creative into customised display ads, based on a user's age, location, gender and online activity.
US-based Dapper was founded four years ago and has offices in San Francisco, New York and Tel Aviv.
In a blog post discussing the acquisition, Eran Shir, Dapper co-founder, said display advertising is "the largest, and most important, content distribution platform on the web, but one that is primarily used to distribute annoying images that bring little value".
"The synergy between our tech and Yahoo!'s scale can really make an impact on the web's ads."
Earlier this month Yahoo! unveiled a new ad format in the form of a takeover on its email log-in page. The new ads were designed to offer advertisers a larger canvas to make display ads more creative and reduce ad blindness.
According to the latest research from the Internet Advertising Bureau and PricewaterhouseCoopers, spending on display ads increased by 6.4% to £381m, the majority of which is on embedded formats such as banner ads.