Facebook Acquires LiveRail To Boost Video Ads

  • Facebook has announced the acquisition of LiveRail, a video ad tech platform for programmatic buying of video ads.
  • LiveRail serves over 7 billion ads every month through its RTB platform, and is expected to report $200 million in 2014 revenues.
  • Facebook and LiveRail will integrate consumer data in order to improve targeting of video ads on both the platforms, resulting in improved engagement among video viewers.
Facebook-LiveRail

Facebook (NASDAQ:FB) announced the acquisition of LiveRail, a video ad tech platform. The move is aimed at helping Facebook extend its advertising reach beyond its in-house apps onto the broader web. Though the terms of the deal aren’t disclosed, popular consensus puts the deal value in the range of $400 million - $500 million range. The acquisition comes close on the heels of Google launching its own video ads RTB, highlighting the importance of a foothold in the highly lucrative video ads market.

LiveRail markets itself as "leading monetization platform for publishers."  The platform reportedly served up to 7 billion video ads per month. LiveRail is also the third most valuable video ad property in terms of reach, with comScore reporting a 37.2% reach among the US population in May 2014.

LiveRail has a huge customer base with hundreds of customers including include Univision, Major League Baseball (mlb.com), PBS, Condé Nast Digital, CBS Interactive and ABC Family. LiveRail’s platform has a winning combination of optimum revenues for video publishers, better click through rates for marketers and improved user experience for video viewers through more relevant ads. The USP of LiveRail will, without doubt, be the real time programmatic buying of video ads space across a pool of publishers. For publishers, Checkpoint is a unique tool which will control accesses to their inventory and can block specific ads from being shown on their ad inventory. The below image is an illustration of the technology driving LiveRail’s platform.

LiveRail technology
Source: LiveRail.com

Facebook-LiveRail Is A Win-Win Deal

The deal is a big win-win for Facebook as well as LiveRail. The companies announced the integration of data from both in order to improve the engagement levels of video viewers through more relevant ads, which will in turn fetch higher revenues for video publishers and better click through rates for marketers.

The company is reportedly on track to register revenue of $200 million in 2014 after reporting $60 million in 2013. This puts the deal value at 2.5 times the expected 2014 revenues and expected Y/Y revenue growth of 233% in 2014.  Can Facebook grow this into a billion dollar revenue stream?

The financial performance was so good that LiveRail was considering an IPO later in 2014. However, Facebook’s offer can be seen as a less risky move mainly due to two factors. First of all, the company can continue to operate away from the focus of the public eye, and with the backing of Facebook there will be no shortage of resources to scale up as need be. Secondly, many of LiveRail’s competitors have suffered post IPO, which is something LiveRail would have wanted to avoid.

Tremor media, which listed on July 5 2013 at $10 per share closed the last trading session at $4.55, implying a fall of 54%. YuMe Inc, another rival to LiveRail, met with a similar fate, falling to $5.99 having listed on August 8 2013 at a price of $9.

Can Facebook Make LiveRail A Billion Dollar Revenue Stream?

It will be hard to quantify the impact of the acquisition on the ad revenue of Facebook, which could result from the higher prices per video ad and improved engagement levels as explained above. However, considering the current revenue size and, more importantly, the growth trend at LiveRail, The chances of converting this into a $ billion revenue stream are high, with the data integration with Facebook set to improve the ad targeting capabilities of the Facebook as well as LiveRail platform. Facebook is definitely on the right track finding ways to keep up its rapid topline growth even as LiveRail brings them a wider reach into the online video ad world.

Should you buy or sell Facebook stock ? We currently have a hold rating for Facebook stock. View the complete Facebook stock analysis.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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