Market Insight

Comcast-owned FreeWheel acquires StickyADS.tv to expand its online video capabilities and geographical footprint

May 13, 2016  | Subscribers Only


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Freewheel has announced the acquisition of a French-based online video firm specialising in technology for programmatic video advertising StickyADS.tv for an undisclosed sum.

Our Analysis

Comcast brought on board its operations the video ad technology firm FreeWheel back in March 2014 for $360m. With that acquisition it marked the start of its digital strategy, showing its strong interest in the online space. Back then FreeWheel had assumed a more than $10m revenues start-up survival pass and it had enlisted major broadcaster clients like Fox and NBC helping them to monetise their online video content. RTL, a European broadcaster, in a similar way moved into video monetisation by acquiring SpotX (for programmatic) also in 2014 for $144m and Smartclip (for European expansion) investing €46.9m for a 93.75% stake in March 2016.

Online video for broadcasters has become a growing business as it is feeding off the back of the strong growth in the overall online advertising. Linear TV advertising is still the main revenue stream for broadcasters, but the online video is gaining traction by advertisers and so broadcasters have reformulated their digital strategies to include it in their operations. Comcast’s “less text, more video” online strategy is a clear indication of how they assess the value of video content. Notably, they have also invested in VoxMedia ($200m, August 2015, that resulted in a Comcast minority stake) to gain access to their premium online portfolio of publications and also importantly to their younger audience. In this way they employ new ways to distribute content and diversify their core cable business into the digital space. The natural next step then for Comcast was to get up to speed with the ad technology that has been developing, starting originally from the online display business and trickling down to online video; so they looked to the programmatic way of buying and selling display and video ads online.

This is the point where StickyADS.tv came into becoming their next strategic acquisition (through their FreeWheel subsidiary) and to set foot in programmatic and supplement FreeWheel’s video ad serving product. StickyADS.tv is a six-year old company, headquartered in Europe. Its competitive advantage is that it is a start-up from France, which is a difficult ecosystem for foreigners to penetrate. StickyADS.tv annual revenues, IHS estimates are below the $10m mark in 2015, (a relative measure of scale of their operations) and importantly their clients are mainly European premium media brands (TF1, ProSieben, The Economist, Le Monde). This is particularly attractive for FreeWheel which is still lacking an expanded European client base. As a standalone combined unit FreeWheel and StickyADS.tv have a strong footing in online video from direct sales to the programmatic serving publication clients (supply-side) across the board and happily surfing on the wave of online programmatic growth in video. IHS predicts that European video advertising will grow by 17% in 2016.

Together, FreeWheel and StickyADS.tv have a significant portfolio of clients, scale and tech capabilities. FreeWheel has large clients of the likes AOL and others mentioned above as well as European players such as Sky and Channel 4 in the UK, and StickyADS.tv serves 7,000 websites. The two firms combined have just under a 600-person workforce across key ad markets: New York, London, Paris, and Beijing. From the investment point of view therefore the acquisition of StickyADS.tv hits both the goals of FreeWheel: programmatic technology and geographical expansion. As for the parent company Comcast, the acquisition of StickyADS.tv boosts and reinforces its international video offering.  

The access to resources that Comcast can bring to these two companies without doubt poses a significant opportunity for growth since the expansion in new markets will drive revenues in the revenues share model of StickyADS.tv. It is down to the integration of the new pieces into the massive structure of the corporate, but this seems to be following the same paradigm as FreeWheel, operationally kept as a separate unit. It is also a question of how much the whole business model of Comcast is shifting from primarily cable towards a new form of television that exits in the online and mobile space. Smart TVs with dynamically targeted ad insertion may seem a step closer for Comcast as they could see an opportunity to employ the online video technology in the TV domain and also provide their clients with an ad product option across all screens (multiscreen solutions); TV and online.

Previously Comcast have invested in onetwosee and this technology, both US-based technology-oriented companies in the dynamic TV ad insertion landscape.

Two strategies emerge for broadcasters as they address the consumption shift away from linear TV towards digital: one is to exploit and deploy the existing technology for online video (as Comcast has done through acquisitions) and the other is to explore ad revenue streams on platforms like YouTube and Facebook. As YouTube monetisation is much more controlled by YouTube itself, for this reason alone it is advantageous for a broadcaster to employ the first route and maintain better control of the monetisation of their content. IHS expects to see further acquisitions in the ad tech space from broadcasting companies in 2016.

Organization
Comcast RTL RTL Group
Research by Market
Media & Advertising
Category
Advertising
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