Industry speak: Roku dishes out US$150 million to acquire dataxu

US TV streaming platform Roku has entered into an agreement to purchase Boston-based dataxu, a demand-side platform (DSP) that enables marketers to plan and buy video ad campaigns. Under the terms of the agreement, Roku is purchasing dataxu for aggregate consideration of US$150 million in cash and shares of Roku Class A common stock.

The acquisition agreement has been approved by each company’s board of directors and is anticipated to close in the fourth quarter of 2019, subject to customary closing conditions, including regulatory approvals.

Currently, Roku claims to stream more ad-supported hours than any other OTT platform. According to a June 2019 comScore analysis, it has more than 30.5 million active accounts as of June 30, 2019. Meanwhile, dataxu provides marketers with an automated bidding and self-serve software solution to manage ad campaigns programmatically across digital platforms. dataxu utilises advanced TV and OTT media planning tools, a proprietary device graph, and data science to help marketers optimise for business outcomes across TV, OTT, desktop and mobile.

The acquisition of dataxu’s platform is said to complement Roku’s OTT advertising platform and enable Roku to provide marketers a single, data-driven software solution to plan, buy, and optimise their ad spend across TV and OTT providers. dataxu brings an experienced team – including strong talent in software engineering, data science and analytics – to work with new and existing marketers on Roku’s proven advertising platform.

“TV advertising is shifting toward OTT and a data-driven model focused on business outcomes for brands,” said Anthony Wood, chief executive officer at Roku. “The acquisition of dataxu will accelerate our ad platform while also helping our content partners monetise their inventory even more effectively.”

According to the release, advertisers today spend more than US$70 billion dollars on traditional TV. Magna Global also states that OTT accounts for 29% of TV viewing but so far has only captured 3% of TV ad budgets. As viewers continue to migrate to streaming, automated media buying solutions are expected to unlock more advertising investment into OTT. Niall Hogan, MD of Ogury for Southeast Asia told Marketing that the deal makes "perfect sense" for both parties and dataxu provides Roku with "good technoly and pipes" that enables Roku to offer agencies and marketeers automated bidding and programmatic buying across OTT, mobile and display.

A smaller amount than expected?

On the other hand, Hogan elaborated that this is an opportunity for dataxu to exit an increasingly commoditised DSP market. He highlighted that it remains unclear how with the current Dataxu operations in places, markets such as Singapore will continue to exist as Roku does not have offices operating in APAC outside of China. He added:

The value may raise some eyebrows, as I am sure many would have expected dataxu to sell for more than the reported US$150 million a few years ago.

The real winners here might actually be the likes of Beeswax, who remain independent, and as a result of the acquisition, can play in a much lesser of a crowded field.

Meanwhile, former Comscore APAC SVP Joe Nguyen said the US$150 million acquisition "seems cheap", considering Turn went to Amobee for US$310 million. However, he expects investors to still have decent returns, given that dataxu has received some US$87.5 million in funding from a series of investments over the past decade.

"Ad revenue on OTT will grow as people start to use them for premium long-form content (old TV ad dollars). Roku is getting a very good tech platform from dataxu to help them grow and monetise ad revenue," Nguyen said. With no publicly-announced growth plans for Roku outside of the US, he said it still remains to be seen how dataxu will be considered by international markets going forward.

Serm Teck Choon, country head and head of product at CtrlShift Malaysia, said the deal signifies that dataxu's aggressive push for TV and video ad buying solutions over last few years finally paid off. For Roku, the acquisition of technology means that it can help its content partners to monetise their inventory in a data-driven way, uplifting its competitiveness as a result.

Agreeing with other industry players, Serm said the value of the acquisition is relatively low when compared to other ad-tech related acquisitions, such as AppNexus by AT&T that is rumoured to be valued between US$1.6 billion to US$2 billion. "The lines between various players in the market are getting blurrier as acquisitions create telco-DSP, brand-publisher, and publisher-DSP combinations. We have to embrace the new world that technologies, including ad tech, are becoming one of the driving forces for business transformation," he added.

Kabeer Chaudhry, managing partner APAC at M&C Saatchi Performance, added that Roku buying dataxu is following a trend of vertical integrations in the adverting supply chain. What will be interesting to see is how this affects the open exchange especially since the supply side owns the demand side.

“Roku has mentioned that it will continue to partner with their demand partners such as The Trade desk and Adobe’s DSP. However, I have a feeling this might change in the near future. Media companies will start limiting access to their advertising inventory only to demand side platforms they have acquired and this might also affect pricing,” he added.