Telstra has written down to zero the value of its Ooyala video business, and recorded a $273 million impairment. A mere four years after the telco’s acquiring the Silicon Valley startup for $270 million, Telstra will attempt to offload Ooyala’s Adtech assets, and retain the firm’s video processing and online video platform businesses.
Following a 2016 write-down, the consummate loss of the startup’s value underscores just how spectacularly Telstra’s acquisition failed.
The Ooyala acquisition was one of Telstra's first diversification moves into the online video streaming market. Infused with capital, Ooyala subsequently embarked – for a company of its size – on a spending spree. The firm entered the Adtech space via the acquisition of Videoplaza in 2014, and solidified its Adtech ambitions by acquiring creative content management platform Nativ a year later.
Signs of blood in the water have abounded since late 2014. The C-Suite has resembled a game of musical chairs, and four CEOs – including both acting and permanent appointees – have held the company reins over the past four years. After Telstra’s 2016 write-down, the halving of Oooyala’s value, and the exit of then-CEO Ramesh Srinivasan, Jonathan Huberman – Ooyala’s fifth and current CEO – was appointed and charged with refocusing the firm around the intrinsic worth of the Adtech assets.
Ooyala’s Adtech troubles are multi-faceted. Setting aside the difficulties that any standalone supply-side platform (SSP) faces, Videoplaza’s SSP has struggled to shed its Euro-centric roots, while Ooyala itself has struggled to combine Videoplaza’s campaign and uplift data with its video-consumption and usage analytics proposition. Provided Telstra successfully jettisons – or simply shuts down – Ooyala’s Adtech business, a second question remains: to what extent will the telco parent find fortune in retaining an OVP business?
IHS Markit believes that the OVP segment’s maturation is in full swing. Although we expect the global OVP segment to grow at a 4.6 percent CAGR through 2022, North American growth – precipitated by market consolidation and product commoditization – will plateau. While opportunity still exists in APAC, Ooyala is likely to be stress tested by Telstra. Whether Ooyala can simultaneously grow, and enhance its operating margin significantly, is an open question.