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European broadcast giant RTL Group said on Thursday it has agreed to acquire a 65 percent stake in SpotXchange, a Denver-based company that runs a marketplace for digital video advertising.
It will pay $144 million plus possible additional payouts depending on business performance. With more than 1 billion auctions per day, SpotXchange is one of the largest global markets in the space.
Under the terms of the deal, RTL also has the option to acquire the rest of the company in the future.
The deal is subject to U.S. competition authority approval and is expected to close by the end of August.
“The investment is the next step of RTL Group’s strategy to become a leading player in all segments of online video and online video advertising,” the company said. It argued that the deal makes it “the first major broadcaster to invest in the rapidly growing market of programmatic online video advertising.”
Founded in 2007, SpotXchange works with such media companies as The Atlantic, Hearst Corporation and Meredith to help them maximize revenue for their desktop, mobile and connected TV video advertising inventory.
“Over 1 billion auctions for video advertising impressions are transacted through the SpotXchange platform daily, with ads delivered to 335 million people in over 100 countries per month,” the company says on its web site.
Online video ads have been the fastest growing part of the digital ad economy. “This growth is driven particularly by programmatic video advertising, which is estimated to increase from $2.7 billion in 2013 to $15.4 billion in 2018 worldwide,” RTL said.
Said Anke Schaferkordt and Guillaume de Posch, co-CEOs of RTL: “Following our investments in non-linear TV services and in multi-channel networks on Youtube, RTL Group has already become the leading European media company in terms of online video views. The logical next step in our strategy is a structural move into the area of digital monetization — improving our skills by adding innovative data — and technology-based competencies.”
They added: “With its impressive growth story and strong positioning in the United States, SpotXchange also represents a unique opportunity to enhance RTL Group’s presence in the world’s biggest and most advanced media market.”
SpotXchange CEO Michael Shehan and COO and CFO Steve Swoboda said: “We are thrilled to be joining the RTL Group, a global leader in media and entertainment, and believe they are the ideal partner to help SpotXchange expand the reach of our comprehensive video ad monetization services. This investment demonstrates RTL Group’s progressive vision and embrace of programmatic trading, ad serving and yield optimization in the digital arena.”
They added: “The companies comprising RTL Group operate in a decentralized fashion which will allow SpotXchange to thrive and grow as the last independent digital video ad monetization platform while providing significant opportunities through partnership with RTL Group’s leading European broadcast companies and top-tier global content producers.”
The two executives will continue to manage the day-to-day operations of the company.
“While not a big deal financially, from a strategic/industry standpoint, this could be one of the more significant moves that has taken place in the broadcasting space, with a major pan-European broadcaster now moving “downstream” into trading advertising inventory, which has traditionally been the preserve of the agency groups,” said Liberum Capital analyst Ian Whittaker. “There are some obvious questions here of RTL’s stake.”
For example, does it mean RTL will be selling competitors’ inventory? “Almost certainly yes, given the scale of SpotXchange’s business,” the analyst said.
He also wondered whether RTL may expand SpotXchange’s reach to start trading TV ad inventory and “if it is looking to, over time, disintermediate media buyers.”
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