The rise of programmatic advertising has wreaked havoc across digital media, giving media buyers far more leverage while pushing down the value of publisher inventory. It has also torn apart the traditional ad network business, which is one reason Federated Media, today announced it would stop battling the tide.
The company will sell its direct sales, or "content marketing" business, to LIN Media for an undisclosed amount and focus entirely on its programmatic business.
"As a venture backed company, it's always a difficult decision to sell a business, but you want to do the right thing for the people and the partners that got you to where you are and I think this does that," said John Battelle, who founded Federated nine years ago and will transition from the company's CEO to its executive chairman.
LIN Media will continue to operate the direct sales business under the name Federated Media while the programmatic side of the company, which began after Federated acquired Lijit Networks in October 2011, will rebrand under the name Sovrn Holdings.
Mr. Battelle in an interview said was happy with the outcome. "I've kind of been around the block a few times and so when things started to disrupt the core of Federated, we reacted. And we survived and then thrived," he said. "It's always challenging and fun and a thrill but there is a point when you have to let go of frustration when things aren't going your way, as they always do at some point in a startup."
"It's a rare thing for a company to go from a standing start to an exit like this," Mr. Battelle added. "That's something I think I will always be part of and I think the team that got us there should be proud of."
Walter Knapp, formerly the COO of Federated Media, will become Sovrn's CEO. Mr. Knapp, who was in charge of the programmatic side of Federated's business, said the deal "Gives us the opportunity to take the proceeds and double down on our programmatic business," which he called the future. Federated's programmatic business, Mr. Knapp said, was larger than the direct business at the time of sale. About 100 of the company's 165 employees will remain with sovrn Holdings while 65 will move to LIN Media.
The new sovrn Holdings, Mr Knapp said, is profitable and pays out $2 million dollars to its publisher network each week. The original Federated Media raised over $57 million dollars from VCs including Oak Investment Partners and the Omidyar Network.