Magnite buys SpotX to deepen its CTV recreation

Michael Barrett, CEO of Magnite.

Magnite

Ad tech player Magnite is acquiring SpotX, a networked television (CTV) and video advertising platform, for $ 1.17 billion in cash and shares, the company said on Friday.

The Magnite share gained more than 25% after the deal was announced. Magnite helps publishers of websites, apps, CTV channels, or other digital media sell storage space through their media. Now Magnite could be even more set for a stellar 2021 as it rides on the back of the booming 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 will be $ 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 deal is expected to close in the second quarter of this year. The company said it will be the largest independent CTV and video advertising platform once the deal is closed. 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 Susquehanna note in December wrote that about 80% of sales came from desktop and mobile devices, but “CTV is the crown jewel”.) Connected TV was a hot sector in the pandemic that industry experts thought it would be, accelerating dramatically a multi-year transition to CTV. The more people are at home streaming 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 reported that the number of advertisers using their audience targeting features increased two and a half times between the third quarter of 2020 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 such as Sling TV, Fubo TV, Philo, and Pluto TV, which are owned by ViacomCBS. It also works with broadcast channels in its CTV app offerings, including Fox and Discovery.

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.

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