Advert tech firm Magnite is shopping for in-game SpotX to deepen its power in streaming adverts
Michael Barrett, CEO of Magnite.
Ad tech player Magnite is acquiring SpotX, a platform for networked TV and video advertising, for $ 1.17 billion in cash and shares, the company said on Friday.
The Magnite share rose more than 26% after the deal was announced. Magnite helps publishers of websites, apps, affiliated TV channels, or other digital media sell storage space through their media. Now Magnite may be even better set for a stellar 2021 as it rides at the back of the booming Connected TV [CTV] sector. The takeover of SpotX, a platform for the video supply side, from parent company RTL Group should help to deepen this strategic game.
The companies said the purchase price of SpotX was $ 560 million in cash and 14 million shares of Magnite, for a total of $ 1.17 billion, based on the closing price of Magnite shares on Thursday.
SpotX was a competitor to Magnite prior to the acquisition, along with companies like PubMatic that recently went public. Other competitors are Google, which is active at several points in the supply chain, ComW's own FreeWheel, Index Exchange and OpenX.
The transaction is expected to close in the second quarter of this year. The company announced that when the deal is signed, it will be the largest independent CTV and video ad platform in the programmatic space. The company serves customers in other formats including display, mobile, and audio.
CTV is a smaller part of Magnite's overall business, but a great opportunity for growth. A December Susquehanna note stated that desktop and mobile devices account for around 80% of sales, but "CTV is the crown jewel". Connected TV was a hot sector in the pandemic, which dramatically accelerated the transition to CTV believed by industry experts to be a multi-year transition. The more people stay at home and stream ad-supported movies and shows, the more opportunities ad tech partners have to show them ads on platforms.
For its part, Magnite has stated that total CTV revenue increased over 50% year over year in the third quarter of 2020. Magnite also said the number of advertisers using their targeting features increased two and a half times between the third quarter and the second quarter of 2019 and the same period in 2020.
Magnite says it has an exclusive relationship with Hulu and its owner Disney. It also works with other services like Sling TV, Fubo TV, Philo, and Pluto TV, which are owned by ViacomCBS. In addition, the company works with broadcasting channels such as Fox and Discovery on its CTV app offerings.
Although advertisers have worked with a number of partners on the supply side in the past, there has been a trend to limit that spend to fewer partners. Advertisers and agencies want to do business with less supply-side platforms to avoid inefficiencies and the potential for fraud. Buying from competitors to increase volume and inventory could be a way for Magnite to gain a competitive advantage over its competitors.
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Disclosure: Comcast is the parent company of NBCUniversal, which is owned by CNBC.