Though ad spending on digital video remains dwarfed by ad spending on TV, the former is growing much more quickly, and by acquiring one of the sector’s emerging leaders, Adobe Systems Inc. is making a smart move, according to the experts at Constellation Research.
With mobile devices especially seen as an increasingly effective channel for digital video advertising, incorporating multi-channel programmatic video platform TubeMogul into its signature Marketing Cloud offering can only enhance Adobe’s value for CMOs and marketers, Constellation Research vice-president and principal analyst Cindy Zhou told ITBusiness.ca.
“YouTube alone reported a year-over-year rise in mobile video consumption of more than 100 per cent last year,” Zhou said. “By integrating TubeMogul into Marketing Cloud – and specifically their Media Optimizer and Primetime solutions – Adobe will be able to help more companies and ad agencies optimize their ad buying by providing the tools they need to divide their audience with greater granularity, before choosing the right channel to target the right segment.”
Both Adobe and TubeMogul announced the $540 million USD acquisition on their respective websites last week.
In a Nov. 10 blog post, TubeMogul CEO Brett Wilson called the acquisition “a great move” for his company’s clients.
“This will be the industry’s first independent end-to-end video advertising platform,” he wrote. “Current TubeMogul clients can envision a future where first-party data and measurement from Audience Manager and Adobe Analytics is available directly in TubeMogul’s platform — a combined data and buying dynamo that spans TV and digital formats.”
“Once integrated, (Adobe and TubeMogul) will enable brands and agencies to plan, buy, measure and optimize their global video advertising with a neutral, independent partner that doesn’t have direct ownership of media or content,” he continued. “Our combined incentive is to arm marketers with insights on what’s working — and act on it.”
Meanwhile, Adobe executive Brad Rencher admitted in a Nov. 10 interview with the Wall Street Journal that while video is the fastest-growing segment in advertising, it isn’t one the company addresses today.
The TubeMogul acquisition will solve that problem by extending Marketing Cloud’s capabilities, Rencher, an executive vice president and general manager of Adobe’s digital marketing division, said.
“We have a long history in video,” he told the Journal. “With the marketing cloud we’re now helping not only create video experiences, but also helping marketers deliver that content to all devices.”
Like Wilson, who will continue to lead TubeMogul under Adobe’s digital marketing wing, Rencer also noted that Adobe’s independence from the media business will make it a more attractive partner for brands and advertisers than some of its competitors. That compatibility was a key reason Wilson embraced the merger, the Journal reported.
In a Nov. 10 blog post, Constellation Insights managing editor Chris Kanaracus noted that by purchasing TubeMogul, Adobe was creating the industry’s first end-to-end independent advertising and data management solution that will span both TV and digital formats, simplifying what has been a complex and fragmented process.
“While today, total digital video advertising spending is about one-fourth that of television ads, digital video ad spend is growing much more quickly, at double-digit rates,” he wrote.
The two companies also share many customers, Kanaracus noted, including Allstate, Johnson & Johnson, Kraft, Liberty Mutual, Nickelodeon and Southwest Airlines.
If there’s a downside to the deal, it’s that it’s unclear whether Adobe will continue its new division’s fight against Google Inc., which TubeMogul has argued engages in unfair practices that make it difficult to use third-party tools to buy ads through Google, Kanaracus wrote.
Though TubeMogul made its initial public offering at $7 USD per share in in 2014 and once reached a high of $23 USD per share, the company’s stock had been volatile before the merger. It closed at $7.67 USD per share on Nov. 9, the day before the acquisition was announced, with Adobe ultimately paying $14 USD per share.
