Contact: Scott Denne
The dizzying number of vendors and dozens of subcategories of advertising technology have had many predicting for several years now an imminent wave of consolidation. Yet for the ad-tech vendors trading on US exchanges, specialization – not consolidation – has become the chosen strategy. Tremor Video has become the latest to adopt such a strategy by selling its video ad network to Taptica for $50m in cash.
Tremor, like Rubicon Project, which earlier this year divested its $100m acquisition of Chango, sees more opportunity to expand its relationships with ad sellers, rather than buyers, although the resemblance ends there. Rubicon is a longtime player in supply-side platforms (SSPs) and generates most of its revenue from that business. Tremor will shed most of its revenue with this deal – its remaining assets accounted for $29m of its $167m in 2016 sales.
While Tremor’s business with buyers has declined, its burgeoning SSP – a video ad exchange – expanded its top line by 84% in the past 12 months to $34m in trailing revenue. Without the weight of its buyside business, Tremor can leverage its newfound capital to invest in an anticipated growth in the supply of video advertising coming through over-the-top and connected TV channels.
That Tremor shed almost all of its revenue with little impact on its stock price – it was up about 2% at midday – speaks partly to the opportunities investors see for it to expand with a business model with software-like margins. It also speaks to just how little value investors place on ad networks that sell services to both sides of an ad sale.
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