Roku is acquiring demand-side platform Dataxu for $150 million in a deal that positions the streaming digital provider to compete more fiercely for ad dollars as they shift from the $70 billion linear TV market to digital.
Demand-side platforms, commonly known as DSPs, are used by advertisers to buy ads through automation. Roku’s move comes as more consumers shift from viewing linear TV to streaming, allowing marketers to target them with ads that carry the same precision as display advertising.
“We have been saying for years now, since we first started Roku, that all TV will be streamed and all advertising can be streamed as well,” Alison Levin, VP of ad sales and strategy at Roku, says. “We’re helping brands to truly make the transition from linear TV to OTT. In addition to the planning tools, automation and identity graph technology, [Dataxu] will further accelerate that transition.”
Roku's acquisition follows AT&T's acquisition last year of ad tech platform AppNexus, whose technology it is using to bolster its ability for publishers and agencies to buy and sell ads in an automated fashion.
“By purchasing Dataxu, Roku is now creating a platform for agencies to plan and buy their connected TV inventory all in one place,” says Richy Glassberg, former co-founder of the Interactive Advertising Bureau and now co-founder and CEO of SafeGuard Privacy, which sells tools for data privacy compliance. “This is now table stakes for them as shown by ATT-Xander buying AppNexus and integrating into their addressable platform.”
Although Dataxu is a significantly smaller player when compared to similar platforms such as The Trade Desk, Media Math and AppNexus — which all carry valuations that far exceed the $150 million price tag that Roku paid — it does allow the company to better compete with its rivals by having a similar offering. Dataxu was considered one of the few large-scale DSPs available for acquisition.
“Another independent buy-side platform is off the table — and for a pretty small price tag,” says Joanna O'Connell, VP principal analyst at Forrester. “Identity talk, audience-driven buying, unduplicated reach and frequency are all hot topics among more sophisticated buyers, which are what all the big advertisers are increasingly requiring.”
Identity graphs are key
Roughly 30 percent of consumers consume video through streaming, yet only 3 percent of ad budgets are directed toward reaching those consumers, according to a study performed by Magna Global.
Although Dataxu brings planning and buying tools to agencies working with Roku, it also provides it with an identity graph, as all DSPs have one. Generally speaking, identity graphs provide marketers with data so they can target specific consumers with ads. Credit card information, email addresses and IP addresses are all used when building identity graphs.
Amazon, AT&T, Google and Facebook are among the major ad players armed with identity graphs. Amazon, for example, has credit card information and knows what its customers are buying. Roku, however, is lacking in this area and its move to acquire Dataxu now sets it up in a better position to better compete with the giants.
Roku already sells its ad inventory through companies such as Adobe’s and The Trade Desk. Levin says Roku will continue working with those players despite the Dataxu acquisition.
Still, some industry leaders wonder how long that will remain the case.
“The acquisition is the latest in a trend of vertical integrations in the media and advertising supply chain,” says Joel Acheson, chief technology officer at digital agency The Shipyard. “The question is what is going to happen to the open exchange if the supply side owns the demand side? It will be interesting to see if media companies begin limiting access to their advertising inventory to the customers of the demand-side platforms they’ve acquired or developed internally—and interesting to see what effect this has on pricing.”
