German media conglomerate Bertelsmann has a bit of a reputation for being ahead of the curve and buying into emerging technologies early, and this week its German broadcast subsidiary RTL has snapped up full ownership of ad tech firm SpotX – to accelerate the company’s advertising revenue in OTT video while the time is right.
SpotX first appeared on the Faultline Online Reporter radar back in 2014, around the same time that RTL first took a financial interest in the firm, and today SpotX is considered one of the world’s largest digital ad tech firms after 10 years on the scene. Since RTL’s 2014 investment, SpotX has almost doubled net revenues and grown EBITDA four-fold, while RTL has continued to steal market share away from its arch rival ProSiebenSat.1.
So why are the advertising businesses of SpotX and RTL flourishing while many others are struggling to innovate in a subscription-supported and ad-blocked video world? It is impossible to provide a perfect recipe for success, but what we can do is highlight a handful of recent moves that may be shaping present and future ad growth.
RTL has bought the remaining 36.4% of SpotX that it did not already own for $145 million, valuing the video ad serving company at $404 million. The plan is to merge the assets of SpotX with the technologies of Smartclip, the online ad serving company RTL bought for $55.8 million last year, to survive the “challenging development” of TV ad markets.
RTL says the close collaboration between SpotX and Smartclip will involve rolling out joint services across its operations, which could range from growing the online ad footprint of British production firm FremantleMedia, to building a programmatic ad strategy for French holding company Groupe M6 – two of many companies under the wing of Europe’s largest broadcaster.
Smartclip aggregates ad inventories of around 700 publishers, and integrates these ads into content for delivery to internet-connected devices, and it has ad deals on smart TVs with Philips, LG and Samsung. Similarly, SpotX provides ad serving tools to media owners and online publishers across multiple devices on one hand, and a way for advertisers to buy video via a direct pipeline to a premium supply while also developing a programmatic strategy, on the other hand.
We have observed SpotX’s technologies tackling hurdles in matching ads with live audiences, a particular difficulty with live sports content where as much as 90% of viewers don’t log on until 5 minutes before kick-off and then immediately leave on the final whistle. To address this, SpotX’s video inventory management platform opens up ad slots in live TV commercial breaks, allowing broadcasters and advertisers to send personalized ads based on age and gender data sets.
SpotX recently teamed up with dynamic ad insertion technology supplier Yospace to address this issue, which helps the likes of BT monetize live sports content via server side ad stitching.
Other SpotX partnerships include a deal with Brightline to enable dynamic and immersive TV ads to be bought programmatically, and Sling TV selected SpotX in May this year to make more of its inventory available for real-time bidding, following a similar announcement Dish made with Adobe earlier this year.
The connected TV space is another area SpotX is moving into, as are competing ad tech firms such as AppNexus, Freewheel and Tremor. Most connected TV ad inventory is available in private marketplaces at present, but ad tech firms are jumping in to the space now in hopes of bolstering connected TV programmatic inventory.
RTL has also promised additional ad tech investment plans in the form of scaling up its business with further acquisitions and partnerships – a roadmap which may involve VideoAmp, another ad tech firm backed by the German group. VideoAmp provides a cross-platform media planning, buying and measurement ad software that pairs linear TV audiences with digital data, through its ATV Ignite SaaS platform for marketers.
Bertelsmann’s keen eye for investments in emerging technologies doesn’t stop at advertising, as the firm headed up a $15 million Series A funding round for Israeli virtual reality content network Inception at the start of this month, giving RTL Group a 15% stake.
Inception combines proprietary technology with exclusive content formats to deliver VR experiences via its app, including original programming created with publishers, channels of thematic content and curated 3rd party content. Inception launched in October last year and the app supports Oculus Rift, Samsung Gear, iOS, Android, Google Daydream and HTC Vive headsets, with Microsoft Windows Mixed Reality and Sony PlayStation VR coming soon.
This week’s acquisition coincided with RTL Group’s latest results, posting revenue up 8.8% to $1.9 billion for the last quarter, but with EBITDA slipping 7.4% to $430 million. Almost 50% of RTL Group’s revenue comes from TV advertising, followed by 17.5% from content, 13.1% from digital activities, 5.3% from platform revenue, 4.1% from radio ads, and 11.3% other.
RTL Group Co-CEOs, Bert Habets and Guillaume de Posch, said, “Back in 2014, the majority stake in SpotX was our first big step into advertising technology; gaining full ownership now is another major step in transforming RTL Group into a ‘total video’ powerhouse. Together with the experienced management teams of SpotX and Smartclip, we are working on an ambitious growth plan for our ad tech businesses. Our joint vision is to build the leading global video monetization offering for broadcasters and premium inventory owners to maximize the value of their audiences consuming total video content across multiple devices.”
SpotX CEO Mike Shehan said, “SpotX is emerging as the premier expert in digital monetization of OTT content delivery, and uniquely positioned to assist broadcasters and other modern TV players with maximizing their profitability in the new delivery ecosystem. RTL Group’s investment will help extend our footprint in TV as we bring together the TV and digital video worlds.”