Updated: Adobe to buy video DSP TubeMogul for US$540m

Analysts weigh in on the marketing cloud vendor's acquisition of a video DSP

Several industry analysts are predicting more consolidation between martech and media technology vendors after Adobe took another definitive step into the adtech space, acquiring video programmatic technology vendor, TubeMogul, in a deal worth US$540 million.

The deal is a combination of debt and cash and is expected to close during the first quarter of Adobe’s 2017 financial year. TubeMogul co-founder and CEO, Brett Wilson, will continue to lead the TubeMogul team, which will now sit underneath Adobe’s Digital Marketing division.

In a statement, Adobe said the acquisition strengthens its leadership in digital marketing and advertising technology. Specifically, the addition of TubeMogul will enable customers to maximise video advertising investments across desktop, mobile, streaming devices and TV, by giving customers access to first-party data and measurement capabilities from Adobe’s data management offering, Audience Manager, and its Adobe Analytics platform.

“Whether it’s episodic TV, indie films or Hollywood blockbusters, video consumption is exploding across every device and brands and are following those eyeballs,” said Adobe Digital Marketing executive vice-president and general manager, Brad Rencher.

“With the acquisition of TubeMogul, Adobe will give customers a ‘one-stop shop’ for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers.”

The pair already shared a number of customers, including Allstate, Johnson & Johnson, Kraft, LÓreal and Southwest Airlines. Wilson also claimed the two companies shared a similar culture and vision for the future of advertising.

Founded in 2007, TubeMogul now has 650 employees worldwide and went public in 2014. It reported annual revenue of US$108.7m in 2015 off the back of 700 customers.

“The combination of Adobe Marketing Cloud with TubeMogul’s software creates a uniquely comprehensive platform that will help marketers always know what’s working – and act on it,” Wilson commented. “We’re thrilled to call Adobe home and believe this will be a great move for our clients, team and shareholders.”

Although Adobe already had programmatic ad capability through its Media Optimizer offering, the purchase of TubeMogul's video advertising platform is a clear indication of the increasingly blurring line between the martech and adtech sectors and pushes Adobe further across that spectrum. It also gives Adobe a comprehensive DSP offering.

Martech commentator, Scott Brinker, agreed Adobe's acquisition of TubeMogul demonstrates the growing convergence of martech and adtech.

"It acknowledges that touchpoints across the customer journey — whether in paid, earned, or owned media — should be orchestrated from a common marketing stack," he told CMO. "I think it was a smart move by Adobe, and I expect we'll see more M&A activity of this kind in 2017."

Pund-IT principal analyst, Charles King, saw the deal as notable for two reasons. The first was that is underscores the critical role video plays in both martech and adtech today and its growing importance.

"At the same time, the deal highlights customers' need for a one-stop shop that understands how the differences between viewing platforms can impact the quality and value of video collateral, and can fulfill cross-channel requirements of any sort," he said.

King wasn't surprised by the news, and noted that Adobe has been actively building out its business, and looking for opportunities and engagements in a variety of markets.

"TubeMogul is well regarded but the company's shares have mostly traded in a narrow range since its 2014 IPO. Overall, the company should be able to achieve more as part of Adobe than it could independently," he continued.

"The company's video demand-side platform and services are well-known and mature, meaning that the acquisition should allow Adobe to quickly step-up its efforts against competitors, including Google, Verizon and Yahoo! That's a crucial point in quickly evolving video advertising markets."

TubeMogul is one in a significant list of acquisitions made by Adobe as it looks to not only shore up its position on the martech side of the spectrum, but increasingly, to bridge the gap across to the media and adtech ecosystem.

Other buys include content management technology provider, Livefyre, in May; the assets of ComScore’s Web analytics business, Digital Analytix, to enhance its marketing analytics capabilities; campaign management software provider, Neolane, for US$600m in mid-2013; and Web software provider, Day Software, in 2010.

Adobe’s first entrée into the digital marketing space was its acquisition of marketing analytics provider, Omniture, in 2009.

"Up to this point, these marketing clouds have focused on all digital channels," commented Forrester principal analyst for B2C marketing, Jim Nail. "With TubeMogul's strength in TV, Adobe is reaching beyond the digital realm, and creating a stack that is more in line with the overall marketing/media landscape."

It could also be the trigger point for a lot more acquisitions and consolidation in the adtech/martech space, Nail said.

"As we've seen in virtually every other business and discipline leveraging technology assets, it's far faster and easier for vendors to buy their way into new opportunities than it is to develop the necessary assets and experience organically," King added.

"With many businesses sitting on unprecedented cash assets, we're likely to see an acceleration in strategic M&A efforts, not a slowing by companies including those in martech/adtech. Adobe's purchase of TubeMogul is certainly a notable example of this dynamic but it isn't likely to be the last."

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