On The Bright Side: Yahoo! Rolls Ahead In Video Advertising

Jan. 20, 2015 4:22 PM ETAltaba, Inc. (AABA)15 Comments


  • Large tech incumbents are paying up major dollars for ad-tech assets.
  • The Yahoo!-BrightRoll deal shows that large tech values scalability in the buy vs. build decision tree.
  • Video platforms are drawing the most dollars and interest. Operators must show cross-device capability.

"We believe the next step for programmatic video advertising as an industry is to extend and standardize globally, make cross-device buying simple and measurable, and complement and integrate with TV."
- Tod Sacerdoti, BrightRoll CEO and Founder, discussing acquisition by Yahoo!

Yahoo! (YHOO) recently closed a $640 million cash acquisition of BrightRoll, the leading video advertising platform in the ad tech industry. The valuation, at 6.4x forward net revenues may appear full, but was consistent with the precedent set by Facebook (FB), which purchased the comparable LiveRail in the summer of 2014 for around $400-$500 million at an estimated multiple of just over 6x. A recent spate of consolidation at the larger end of the ad tech market comes in response to a number of issues raised in the ongoing evolution of the industry.

One such issue is the obvious fragmentation in the various forms (video, display, mobile) of online advertising. Advertisers seek the wherewithal to scale and thereby execute their buying decisions more efficiently through an aggregate of publishers. Platforms like BrightRoll and LiveRail make such scale readily available (indeed they often target larger publishers) and provide a ready-to-market avenue for the ambitions of acquisitive behemoths. Whereas smaller platform solutions (e.g. Adaptive Medias (OTC:ADTM)) are sustained organically, there exists a long precedent for the big tech giants to deploy capital from their M&A coffers once a threshold of critical mass draws their eye. There is usually observable synergy in that the buyer typically brings a stable of accessible publishers to immediately funnel into the acquired platform.

We have already explained here and here why video is the natural hub for consolidation. However, it is worth a refresh in the context of this discussion. The economics of video quite simply continue to outpace all other formats. Furthermore, 2015 promises

This article was written by

William Nichols and Associates, Inc. Venture Capital Partners

Disclosure: The author is long ADTM. Business relationship disclosure: The article has been written by one of William Nichols & Associates’ investment associates. William Nichols & Associates is not receiving compensation for it. William Nichols & Associates has no business relationship with any company whose stock is mentioned in this article.

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