Market Insight

Limelight sells EyeWonder to DG for $66m

August 30, 2011

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Content Delivery Network (CDN) Limelight Networks will sell EyeWonder to DG (formerly DG FastChannel), for approximately $66m in cash. Eyewonder provides ad management services to agencies and publishers for rich media formats (in-stream, in-player and in-page), while DG supplies digital media solutions to the advertising, broadcasting and publishing industries. DG plans to integrate Eyewonder’s behavioural ad services into its Mediamind and Unicast units within its internet division – in terms of scale, EyeWonder’s Predictive Behavioural Targeting service served over 3.5bn targeted impressions in Q2 2011. The Eyewonder unit is expected to generate $36-$37m in revenue in 2011 – no significant change from Limelight’s estimate in 2009, of $35-$40m.

The Eyewonder sale is due to close on 1 September 2011. Limelight will use the cash from the sale to implement a $25m share repurchasing scheme. The CDN only completed its $110m acquisition of Eyewonder in May 2010, after announcing the deal in 2009, and had yet to fully integrate the company before selling it on.

Limelight’s acquisition of EyeWonder was part of its strategy to diversify its portfolio into value-added services in the face of rapid commodisation and price competition in the CDN market – its core business.

However, the ad unit has failed to grow as expected from 2009 to 2011 in terms of annual revenue – with DG’s forecast of $36-$37m in 2011 showing no increase from $35m-$40m reported by Limelight in 2009. By contrast, Limelight’s suite of SaaS (software-as-a-service) that it has built up via acquisitions has been more financially successful; the CDN’s buys in the sector include video management firm Delve Networks (2010) and web content management firm CMS (2011) which have noted revenue growth over 50 per cent since integration.

Given its underperformance, Limelight is cutting its losses (selling Eyewonder at $44m below the price paid 15 months previously) to narrow its strategic focus on improving its core CDN platform and developing its SaaS suite.  Limelight’s VAS portfolio now encompasses mobile, web and video content management, web application acceleration, cloud storage, and consulting.

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