Category: Video Advertising Course

Two publicly traded ad-tech companies are combining to push deeper into video advertising.

Los Angeles-based Rubicon Project and New York-based Telaria have agreed to an all-stock deal that will leave Telaria stockholders with 47.1% of shares while Rubicon Project’s stockholders will own 52.9%. After news of the merger, which was announced today, Rubicon Project’s stock price rose by more than 7% to $7.75 shortly before markets closed. Telaria’s stock price also increased more than 11% to $8.39.

According to a combined statement from both companies, the merger will create the world’s largest independent sell-side advertising platform. Telaria, which was known as Tremor Video until it rebranded in 2017, brings an expertise in connected television to Rubicon’s programmatic platform. In addition to connected TV, the companies will let publishers continue to buy ads on desktop, audio, mobile and other video platforms across an increased geographic footprint that includes the Americas, Europe and Asia-Pacific regions.

After the deal is finalized, Rubicon Project President and CEO Michael Barrett will become CEO and Telaria CEO Mark Zagorski will become president and chief operating officer.

According to Zagorski, the merger will allow the company to better compete with even larger players and also better position itself for the era of connected television—a sector of the ad-tech space that’s expected to grow in next year. Combined revenue of both companies was $217 million between the end of September 2018 and September 2019, a 32% increase over the same period between 2017 and 2018.

In an interview, Zagorski tells Forbes “the reason why this merger made so much sense is there are so many complements.”

“What was also really apparent though as we were building our businesses out was there was this huge demand for this single, one-stop shop both from a buy side and a sell side,” he says.

The deal, expected to close in the first half of 2020, comes at a time when a number of ad-tech and mar-tech companies are merging or selling with higher frequency. Some companies are selling to becoming tools within larger firms while others are merging to create the scale needed to compete with juggernauts like Google and Facebook.

Apart from the existing competition, ad-tech companies also face heightened regulatory scrutiny and uncertainty as lawmakers at both the state and national levels look into regulating how companies collect and use consumer data for commercial purposes including digital advertising. Next month the California Consumer Privacy Act goes into effect, and several other bills are being considered in Congress.

According to Barrett, the two CEOs met each other years ago soon after entering their respective roles. He said they were inspired by companies like The Trade Desk, another publicly traded ad-tech company that has scaled over the years. Barrett said a combined company of Rubicon Project and Telaria would “complete the pie.” It also allowed Rubicon Project to grow its video business.

According to Telaria’s most recent earnings, connected TV made up 50% of the business in terms of net revenue, while Rubicon’s was much smaller. (Zagorski says the combined company—which will have a new name sometime next year—expects on a pro forma basis to have a connected TV operation in the “mid- to high- teens as a percentage of business.”)

“Although we were doing well in video, we were nowhere in CTV,” Barrett tells Forbes. “Then you look at all the success that Mark and Telaria has had in a hot, strategic area.”

Finding connected TV opportunities is increasingly appealing to marketers looking to diversify their advertising budgets. And while Facebook and Google have been able to win the majority of new digital ad dollars spent on mobile and desktop platforms, programmatic TV advertising is still largely untapped. That’s led major networks, streaming platforms and cable companies to look for ways to collaborate on sharing and scaling data. For example, Viacom, NBC, Fox and Univision have joined a consortium called OpenAP, which lets them pool their data for audience-buying.