July 31, 2014 12:58 pm

RTL buys online video advertising group

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Europe’s largest broadcasting group, RTL, has made an unusual bet on the growth of online video, paying $144m for a majority stake in digital advertising marketplace SpotXchange.

The move – which contrasts with other broadcasters’ heavy investments in content – is designed to protect RTL’s advertising business as online ads are increasingly sold through automated systems via complex chains of intermediaries

“Long term, we have the risk of being disintermediated” from the process of selling online video ads, said Guillaume de Posch, RTL’s co-chief executive.

“We fully understand how to sell commercial spots on TV. But in online video, the world is much more atomised.”

Founded in 2007 and based in the US, SpotXchange automates the process by which marketers buy ad slots from online video publishers. It processes more than 1bn auctions for ad impressions each day and claims to reach 335m users a month.

RTL is the first TV broadcaster to buy an ad exchange. The deal follows a rush by media, technology and telecoms groups to buy ad exchanges. Facebook last month acquired video ad exchange Liverail, while AOL last year snapped up Adap.tv. Google, Twitter and Telefónica have also bought exchanges in recent years.

The acquisition price, which may rise with earn-outs, values SpotXchange’s equity at six times expected revenues of $40m this year.

Mr de Posch said RTL invested in the exchange because agencies and other intermediaries were becoming increasingly powerful in the complex business of trading online video ads.

“We want to be present in the value chain, not only as a pure publisher [of online videos]”, but also as a seller of advertising, he said.

Nonetheless, the deal is likely to raise questions about SpotXchange’s neutrality, given that it will be serving ads for videos owned by RTL as well as those of other broadcasters.

SpotXchange’s chief executive, Mike Shehan, said in a statement that the company had decided to sell a 60 per cent stake to RTL, rather than become “one feature in a giant ad tech stack” by selling to a US tech group.

“With this deal, SpotXchange reaffirms our commitment to serving publishers’ needs, as opposed to creating any conflict of interest with either the buy side or supply side,” he said.

Mr de Posch said: “We’re not gobbling up this platform,” adding that RTL lacked a strong ad sales presence in the US, where SpotXchange is focused.

Asked if SpotXchange would be used to serve advertising for all RTL’s short form online videos, he said: “It’s too early to say.”

RTL’s focus remains on long online videos, where ads are still sold directly to agencies and brands. However, it has moved into short-form videos, where ads are increasingly traded on platforms such as SpotXchange.

Such platforms perform auctions between ad buyers in the milliseconds after an internet user clicks on a particular video.

Shares in RTL, which is controlled by German media group Bertelsmann , have risen by one-third since a secondary public offering last April.

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