Verizon’s recent $4.8bn acquisition of Yahoo is clearly seen as an attempt to stand up to the dominance of Google and Facebook. With last year’s acquisition of AOL’s advertising technology, Yahoo’s online brand, audience and data of mobile customers — Verizon hopes to build an advertising network that can compete with the efficiency and size of its bigger rivals and defend itself from the growth of Snapchat and Twitter.
Both Facebook and Google are fiercely investing in machine learning, mobile messaging, virtual reality and a host of innovations to fuel their growth in the years to come. Along with mobile, both companies are moving fast to ride the growing wave of digital video ads. With inventory being in huge supply and companies collecting better customer data, the pricing and placement of digital ads is only get to improve.
Online video advertising is still a smaller draw compared with TV, however as digital videos grows, the share of wallet the TV Industry enjoys could shrink in the years to come. According to Mark Zuckerberg, Facebook chief, Facebook was remaking all of its apps and services with video in mind, and suggested that in about five years video may be the main way in users want to communicate, socialise and be entertained.
It is in this context, the second M&A deal gains significance. Taboola, the company better known for "Content you may like" service at the bottom of articles, has acquired New York City-based video ad tech firm ConvertMedia as it looks to take on the likes of YouTube, Facebook, and Snapchat in the video advertising space.ConvertMedia specializes in what are known as "outstream" video advertising formats, which tend to appear within the content of an article and only play when the viewer is actually looking at the ad unit.
Outstream video ads are loved by both publishers and ad buyers alike. They can appear anywhere on a site, not just within a piece of video content, can be bought programmatically (using automated platforms rather than having to buy direct from sales teams), and they tend to be less annoying for the user than pre-roll or mid-roll video ad formats that require them to watch an ad before they can get to the actual video they want to watch making them highly prized inventory. For Taboola it means it can get its ads much higher up the page, where they are more likely to be seen and driveits ad rates much higher than where they are today.
ConvertMedia's other competitors include Teads, AppNexus, Altitude Digital, Tremor Video, and SpotX. We expect additional rounds of consolidation to take place, as well as new money and entrants coming into the market. As per the latest report by Accustream Research, despite some investor confusion about what valuation principles perfectly apply when benchmarking business model performance surrounding mobile/digital video ad tech companies (whether they are tech companies, media organizations, both or neither), publicly traded and privately-held vendors are forecast to steadily increase their share of the business through 2018.
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