Magnite buys SpotX for $1.14B to expand CTV ad sales

UPDATE: April 30, 2021: Magnite today closed its SpotX acquisition for a purchase price of approximately $1.14 billion. The combined company’s clients will include A+E Networks, AMC Networks, Crackle, Discovery, FOX, fuboTV, LG, Roku, Samsung, Sling TV and Vizio, per an announcement.

Dive Brief:

Magnite, the sell-side platform formed after last year's merger of Rubicon Project and Telaria, agreed to buy rival SpotX for $1.17 billion in cash and stock from RTL Group. The planned acquisition will create the biggest independent connected TV and video advertising platform in the programmatic marketplace, the company said in an announcement.
Magnite and SpotX last year saw combined net revenue of $350 million, 67% of which came from CTV and video advertising in the fourth quarter. The CTV business would have almost tripled from a year earlier to $42 million in the quarter, Magnite estimated. Now, the company is targeting cost savings of more than $35 million, with half of that coming in the first year after the merger, which is expected to close this spring.
Magnite and SpotX sell programmatic CTV and over-the-top (OTT) inventory for media owners including A+E Networks, Discovery, Disney/Hulu, Microsoft, Roku, Samsung, ViacomCBS and WarnerMedia. Magnite will provide more details about the transaction and Q4 2020 results on Feb. 24, per the announcement.

Dive Insight:

Magnite's planned acquisition of SpotX will help the SSPs to pool their resources as the market for CTV and streaming video advertising rapidly expands. With many U.S. households canceling cable and satellite TV service in favor of connecting their TVs directly to the internet, advertising video-on-demand (AVOD) services like Hulu, Pluto TV, Roku Channel and Xumo are providing a low-cost or free alternative to services like Netflix and Disney+ that don't carry advertising. These services are winning over audiences looking for fresh programming with many consumers spending more time at home during the pandemic.

As viewing habits change, advertisers are expected to shift their spending to platforms like those that Magnite and SpotX represent. Spending on U.S. programmatic CTV video ads is forecast to increase by more than 54% to $6.73 billion this year and by 29% to $8.67 billion in 2022, researcher eMarketer estimated in October. Sixty percent of U.S. advertisers said they planned to shift ad dollars from linear TV to either CTV or over-the-top (OTT) streaming services this year, according to a November survey by the Interactive Advertising Bureau (IAB). Audience-based reach among these video platforms is a priority. Among the advertisers planning to shift spending to CTV and OTT, 81% cited targeting and efficiency as a reason to do so, while 55% said incremental reach was important, per the survey.

"Ad-supported CTV is just beginning to draw budgets from linear TV and we will be well-positioned to participate in the strongest segment of industry growth for the foreseeable future," Michael Barrett, president and CEO of Magnite, said in a statement.

The planned merger of Magnite and SpotX comes as the companies seek greater scale to compete with other SSPs in the programmatic marketplace. Those rivals include PubMatic, which went public in December, Google, Comcast's FreeWheel, Index Exchange and OpenX. Magnite's revenue grew 12% from a year earlier to $61 million in its September quarter, including CTV revenue gains of 51% to $11.1 million, per its quarterly report. Political ad spending and the return of live sports helped to drive revenue, management said in a conference call.