RTL's acquisition of SpotXchange an 'interesting development' but unlikely to bring programmatic and TV closer, analysts say

By Angela Haggerty, Reporter

August 4, 2014 | 6 min read

RTL’s acquisition of a 65 per cent stake in programmatic advertising firm SpotXchange is the latest nod to the rising interest in ad technology amid the boom in online video – but any speculation of a wider move to bridge programmatic and linear TV is premature, according to analysts.

Deal: There is speculation over what the RTL deal will mean

The news, revealed last week, makes RTL the first TV broadcaster to buy an ad exchange, and CEOs Anke Schäferkordt and Guillaume de Posch said in a joint statement that it was the “logical next step” for digital monetisation.

However, speculation that the move could signal a bigger shift in TV advertising by bringing programmatic trading into the mix in a growing market of internet-connected TVs and devices has been played down by analysts.

“I think it’s an important area and it’s an opportunity for RTL to get involved,” Enders TV research analyst Toby Syfret told The Drum, “but I think one thing’s got to be clear and that’s that the reason for getting into the programmatic buying space has a lot to do with the very specific things that we’re seeing in online video advertising.

“The sort of things you might be wanting do on a programmatic basis would be much smaller than TV advertising. I think the trouble is if you pay a premium for an audience then you lose all the rest of the audience.

“My feeling is in the foreseeable future the two will live side by side,” he went on. “As long as linear TV continues to deliver some big mass audiences, and with some high quality programming, that will attract the best advertisers and the great creators who invest a huge amount of money in their adverts.

“It’s a very interesting development for a big broadcaster. It’s good that RTL is investing time and interest in it because the connected world is growing and there are changes and you don’t want to miss out, you want to be in there.”

Broadcaster RTL will pay $144m for its stake in SpotXchange and according to RTL co-chief executive Guillaume de Posch it will give the business access to a much younger, technologically switched on audience.

The Luxembourg-based company owns TV channels and radio stations across Europe as well as production companies around the world. It owns London-based Fremantle Media, and produces major TV shows such as The X Factor. The company also used to own Channel 5, which it sold to Northern & Shell in 2010.

RTL has invested a lot of money into developing its online video presence in recent times and it recorded 16.8 billion video views last year, a figure De Posch expects to double this year.

According to Eleni Marouli, senior advertising analyst at IHS, the move from RTL signals both that big broadcast and media organisations are recognising the benefit of ad tech, and that they are watching the behaviour of new media players closely.

“I think the main reason behind this move is the Facebook acquisition of Liverail,” Marouli explained. “There’s generally been a lot of speculation about the true value of ad tech companies. There have usually been two routes; there are those who go the IPO way where there has been mixed success, and other companies have been acquired by larger companies, such as AOL and adap.tv. The effect has not really yet been seen, we haven’t yet seen what adap.tv has done for AOL.

“But then with Facebook – which hosts the second-most viewed videos after YouTube in the world – acquiring Liverail, it brought attention to more traditional non-digital players. Although RTL have stated they will not currently integrate most of their online sales into programmatic buying, they see now that there is value to this ad technology.

“It’s more of a safeguard for the future,” Marouli went on. “I think the way they described it was as a short term offensive, long term defensive acquisition. They want to make sure if it does really take off – because they’re not yet convinced – that they’re not left behind.”

Marouli added that the deal gave both companies a stronger foothold in international markets.

“As a US-founded company entering less mature markets, SpotXchange naturally started in a weaker environment.” she said.

“They’ve been here for a couple of years now and they’ve really struggled to penetrate Germany, UK, France, Italy, Spain, and I think now RTL is going to help them break down some of the legacy media structures they’ve been struggling to work with.”

On the possibilities of combining programmatic advertising and traditional TV advertising at some point in the future, Marouli said that the concept had not moved in the way that some had expected and there is unlikely to be any significant developments in the next few years.

“In terms of programmatic moving to TV, this is something a lot of people have been talking about and exploring but it’s not something we’re going to see in the near future,” she said. “Deals such as these might not bring programmatic to TV, but what they will do is wake the industry up to further exploration of data and targeting.

“However with traditional TV advertising, you often don’t want to target, it’s just about increasing brand awareness.”

According to the IAB, 28 per cent of the UK display ad market was traded programmatically in 2013, representing £500m of the total £1.86bn display ad spend. The figure is expected to rise significantly this year.


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