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Digital video ad spending is expected to grow by double-digits through 2020
Digital video is ad spending is growing fast. It is poised to see double-digits annually through 2020, according to eMarketer, more than tripling from the $5.24 million spent in 2014 to $16.69 million.
Obviously there's a lot of money to made and so Adobe is planting its flag firmly in the space, announcing on Thursday that it has entered into a definitive agreement to acquire video ad tech company TubeMogul. Adobe is purchasing all of the company's outstanding common stock for $14 per share, or the equivalent of approximately $540 million net of debt and cash.
Going forward, TubeMogul will become part of the Adobe Marketing Cloud, the company's integrated digital marketing platform. TubeMogul CEO Brett Wilson will continue to lead the TubeMogul team as part of Adobe’s Digital Marketing business.
Though it started out as a video analytics platform, TubeMogul pivoted to become a programmatic video advertising platform focused exclusively on the buy side of the media industry.
Unlike other ad tech companies, TubeMogul’s revenue comes exclusively from advertisers; the company does not make money by providing services to publishers. Instead, they provide a SaaS based platform that brands and agencies use to buy media.
The platform automates the execution of campaigns across TV and digital video and optimizes where ads run in real-time based on the goals of each campaign.
In a blog post, Wilson explained why Adobe was a good fit for TubeMogul, and vice versa. First, he said, the two companies would be able to provide "the industry’s first independent end-to-end video advertising platform."
"Current TubeMogul clients can envision a future where first-party data and measurement from Audience Manager and Adobe Analytics is available directly in TubeMogul’s platform — a combined data and buying dynamo that spans TV and digital formats," he said.
In addition, he noted the "similar values and corporate cultures" of Adobe and TubeMogul.
"Both companies have a track record of innovating marketing and advertising through software (in Adobe’s case, dating back decades). Both companies invest in building a culture of doers. And both companies are driving transparency in the industry."
The two companies seem to have a fair amount of overlap in their current customer bases, including Allstate, Johnson & Johnson, Kraft, Liberty Mutual, L’Oréal, Nickelodeon and Southwest Airlines.
“Whether it’s episodic TV, indie films or Hollywood blockbusters, video consumption is exploding across every device and brands are following those eyeballs,” Brad Rencher, executive vice president and general manager of digital marketing at Adobe, said in a statement. “With the acquisition of TubeMogul, Adobe will give customers a ‘one-stop shop’ for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers.”
This news comes one day after TubeMogul announced its third-quarter results, in which it reported revenue of $56.1 million, above the expected $54.17 million, though it badly missed on earnings per share, with -$0.34 a share, while analysts had been expecting -$0.25 cents a share.
TubeMogul also saw increased net losses during the quarter, growing 235 percent year-over-year, from $3.7 million in Q3 2015 to $12.4 million in Q3 2016.
TubeMogul went public in July of 2014 at a $7 IPO price. The price hit a high of $23.62 in December of 2014, but has tumbled since, having last closed abover $20 in January 2015. The company's stock ended trading on Wednesday at $7.67 a share, barely above its IPO price, but it has spiked 81.8 percent on the acquisition news, to $13.94 a share.
The transaction is expected to close during the first quarter of Adobe’s 2017 fiscal year.
(Image source: tubemogul.com)
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Founded in 2006 by online video buffs who met while in graduate school and won the UC Berkeley Business Plan Competition, TubeMogul's objective from the start has been to empower online video producers, advertisers and the online video industry by providing publishing tools and insightful, easy to interpret analytics.
With TubeMogul, users upload videos once and TubeMogul deploys them to as many of the top video sharing sites the producer chooses. TubeMogul's integrated analytics then provide a single source of metrics on where, when, and how often the videos are viewed. TubeMogul's free beta service has been live since November of 2006. In January 2008, TubeMogul announced the launch of its Premium Products, which include a host of new professional features.