Videology seeks buyer as Google and other tech giants dominate ad-tech industry

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  • Video-ad specialist Videology is up for sale. It has
    tapped the digital media advisory firm Luma Partners to help
    find a buyer.
  • Videology has built out a set of tools to help take
    advantage of the expected growth in ‘advanced TV’ advertising,
    where TV ads are sold using data and software.
  • But it will be tough for Videology – which has raised
    close to $200 million – to recoup its investment as the number
    of potential acquirers narrows amid a wave of ad tech
    consolidation.
  • Two of the company’s biggest partners — 21st Century
    Fox and AT&T — are tangled up in other deals that could
    keep them from making a bid. Other obvious buyers have
    competing interests already.

Videology, a maker of software used to place video advertising,
is looking for a buyer, Business Insider has learned, as ad-tech
power continues to consolidate among the largest players in the
technology industry.

Videology helps both ad buyers and media companies place ads
using software and data. It has hired the digital media advisory
firm Luma Partners
to help facilitate a sale, according to people familiar with the
matter. Executives Videology and Luma declined to comment.

Founded over a decade ago, Videology has raised roughly $200
million from investors. Back in 2013, the company nabbed $60
million in series D financing when the ad tech sector was
percolating. As recently as 2014, Videology was mulling an IPO,
Business
Insider reported.

Yet by early 2016, Videology let 8% of its workforce of about 400
employees go,
reported AdExchanger
. Then, last August, the company raised
an
$80 million credit facility
via the financial technology firm
FastPay and Tennenbaum Capital Partners. 

It won’t be easy for Videology to fetch a price that will allow
it to fully pay back its investors, let alone provide a big
return, say people with knowledge of the financials. One of the
people said it is asking $500 million, but it’s unlikely to get
that much. 

That’s in part because the majority of Videology’s revenue comes
from its ‘video ad network’ business, via which it helped web
publishers and advertisers book videos ads. That business is
declining, say people familiar with Videlology’s financials, and
Videology’s 2016 revenue was down versus 2015, they said.

Problematic acquirers

More recently Videology has leaned into building tools and
services designed to help fuel the growth of ‘advanced TV’
advertising– as TV ads are expected to increasingly be sold using
richer data sets designed to mimic the precision ad targeting
common in digital media to TV (e.g. showing car ads to people
currently looking to buy new cars). 

“They have gotten very good at TV analytics,” said Lorne Brown,
CEO of SintecMedia a company that provides tools and services to
TV companies designed to help manage their advertising and
improve yield. “and helping advertisers find the right audiences
on linear TV and other places. They can help extend your reach.”

But that advanced TV ad market is still fairly nascent. And many
big TV companies like NBCUniversal are focused on building their
own proprietary offerings.

The list of potential buyers is quickly shrinking as digital
power becomes concentrated among a few giants – and many
independent ad tech startups sell for paltry amounts compared to
previous valuations (Rocket
Fuel is the best example of this
).

Two of Videology’s biggest partners have suddenly become
problematic acquirers. 21st Century Fox, which has used some of

Videology’s tools to help build out its own data-driven ad
operation
, is in the
middle of selling many of its assets to Disney.

Similarly, AT&T has worked with
Videology to sell linear TV ads ‘programmatically.”
 Yet
even as AT&T says it wants to move aggressively in the
‘addressable TV’ ad space, it’s deal for
Time Warner is being held up in court by the US government.

A handful of other potential Videology buyers could make sense,
but many have competing interests. For example:



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