ADOTAS – Adobe is making a big push into online video by purchasing video ad manager Auditude in a deal that supposedly hits triple digits. Adobe clearly wants a bigger chunk of the online advertising space, it seems, and it’s willing to get it through several expensive acquisitions: It picked up the data management platform Demdex at the very beginning of this year. But the Auditude purchase sends the clear message that online video is about to explode, and Adobe wants to play a major role.
For Auditude, this acquisition is a great outcome. The deal occurred at a very healthy multiple of revenue and sends a clear signal to the market about the significance and value of online video advertising technology.
The rationale behind the deal seems clear. Adobe wants to move upstream and provide more sophisticated value-added services on top of their core infrastructure technology. Just like the telecommunications companies, Adobe doesn’t want to be merely the “dumb pipes” responsible for cheaply providing the infrastructure on top of which other companies make their fortunes. As internet-delivered video continues to explode and slowly work its way toward replacing traditional broadcast TV, Adobe clearly sees an opportunity to put their technology at the heart of TV 2.0.
For proof of the march toward connected TV, look no further than the recently announced partnership between LG and YuMe, where the latter company is helping Toyota serve ads to consumers who use a connected TV app store or search screen. By purchasing Auditude, Adobe is getting a roster of premium customers that translate very well to connected TV, including Comcast and Major League Baseball.
Adobe is already dabbling in connected TV with its Adobe Pass software, which is widely used by content owners to authenticate their video streams across connected platforms. As more networks look to monetize their content on internet-connected TVs, Adobe can now offer them ad serving and access authentication in one shop.
Then there’s Adobe’s already massive role in the online video space. Flash powers the vast majority of online video, yet Adobe has received relatively little financial benefit from the ubiquity of its format. Adding advertising capabilities not only provides potential opportunity to monetize Flash’s enormous footprint, but potentially defends the platform long-term against commoditization and eventual replacement by HTML5.
Although this all makes sense in principle, Adobe may initially face some challenges attempting to get publishers and advertisers to adopt its new integrated solution. The addition of Auditude to its Adobe Marketing suite would give premium publishers a stack that contains video ad serving, analytics and data management, but this is unlikely going to generate the “1 +1 = 3” math that Adobe is going for. Most publishers already have analytics tools and DMPs, and for those looking to expand into video, it’s far simpler and more cost-effective to find a stand-alone video solution, rather than tear everything down and overhaul the entire system with an integrated suite.
While they may be newcomers to this space, Adobe’s reputable brand and integrated tools, combined with Auditude’s technology, is sure to push the boundaries of what online video can be. While they will have an uphill battle at the start, it’s very likely that the trusted Adobe name will encourage more premium publishers and advertisers to explore the segment. If anything, this will lead to increased competition, which will surely drive increased innovation in the space.