Roku has snatched programmatic ad tech firm Dataxu for a steal at $150 million – half last year’s reported asking price. But why in a flourishing market of programmatic advertising – boosted by the rise and rise of connected TV devices – has Dataxu’s value declined so dramatically?
The answer quite simply is that the original WSJ-reported price tag was grossly overinflated – itself undermining Dataxu’s success in providing data management software and marketing analytics for programmatic ads. For Roku, the message is clear – expand and sell ad inventory outside the Roku walled garden and do it quickly. Acquiring Dataxu is a move to accelerate the process of measuring and monetizing OTT inventory across mobile and desktop – combining data from Roku’s 30.5 million active users with Dataxu’s 40 million North American connected TV households via its TotalTV Marketplace.
But the acquisition is in turn a reaction from Roku against the declining value of streaming hardware, as shown recently by the 14% Roku share slump triggered by a Comcast marketing ploy to give away free Xfinity Flex set tops with 4K and integrated search to internet-only subscribers.
So, Dataxu’s demand-side platform (DSP) brings assets like its proprietary device graph and automated TV buying tools to the existing Roku ad business, which was the standout performer in the company’s second quarter results. Roku, not content with merely extending its native dominance in the connected TV space, is becoming a force to be reckoned with in advertising – through Dataxu honing its skills in optimizing business outcomes across multiple platforms.
Presumably this will tie in nicely with the Roku Activation Insights analytics tool launched earlier this year, a piece of software for tracking a brand’s linear TV campaign performance and flagging the potential missed OTT audience opportunity. Part of the Roku Ad Insights suite, Roku says the software helps marketers analyze AVoD campaigns and help establish the optimal budget to spend on the Roku platform.
A DSP like Dataxu enables advertisers to bid for ad space on an impression-by-impression basis through a single interface to an exchange, via a publisher’s supply-side platform (SSP) which connects publishers to ad networks and exchanges. Crucially, the purchase allows Roku to expand its supply-side presence.
As mentioned, Roku’s Q2 revenue grew 59% year on year to $250.1 million, primarily on the back of increased advertising as Roku managed to more than double the number of monetized video ad impressions. Central to this was deterministic data, which is helping advertisers reach more consumers at a more accurate level, according to Roku, claiming registration data is 21% more accurate than basic IP addresses, which is often the preferred targeting method for ad tech firms. This registration data is driving use of Roku proprietary targeting segments in ad campaigns, more so than any other tactic, Roku claims.
The data is overwhelming, claiming that Roku-only users are twice as likely to consider ads on Roku more relevant and personalized than users of Amazon Fire and Apple TV devices, according to figures from Dynata.
Tipped as one of the industry’s most progressive programmatic and connected TV vendors, Dataxu received a $10 million investment from Sky in 2016, using the funding to launch a self-serve TV buying platform the following year.
Around the time of its game-changing backing from Sky, Dataxu also landed a significant deal at Dish Network, one of the first companies to offer addressable TV and programmatic ad buying on its satellite TV business. It launched what it claimed to be the industry’s first impression-by-impression programmatic marketplace for linear TV, with demand side partners Rocket Fuel and TubeMogul joining Dataxu.
Earlier this month, we spied findings showing that connected TVs have grown to account for 50% of all video advertising impressions, according to data from Extreme Reach’s AdBridge platform, an asset management system for video ads. Mobile accounts for around 25% of all video ad impressions, according to the report, marking the fifth consecutive quarter that connected TVs have outranked mobile for share of video ad impressions.