On Friday, UK-based video search engine and ad network Blinkx purchased U.S.-based ad network Burst Media for $30 million in cash and stock. According to the release, "The combination of the two companies will bring Blinkx's 35 million hours of online video and TV to Burst's audience of over 130 million unique users (source: comScore Media Metrix December 2010). blinkx will create contextually relevant video channels for Burst's network of publishers, thereby aggregating an online video audience for advertisers across long tail internet sites, which will rival the scale of television networks." Read the release. Blinkx says that it expects the acquired company to have a "go-forward revenue run rate" of $33-34 million as it looks to leverage Burst's publisher relationships and drive video advertising through Burst's traditionally, display-focused network.
Burst Media CEO Jarvis Coffin discussed the acquisition and its implications. Click below or scroll for more...
- Why sell to Blinkx? Why sell now?
- What happens to the adConductor business?
- What happens to the Burst Media team? Where are you going to fit in the new company?
- What does today's transaction say about the ad network model, if anything?
- Does this transaction signify to you the death of an ad network in any way?
JC: Well, there are a couple of questions there. So let me answer the first question… Which is why sell to Blinkx? And I think it comes down to the fact that they have what we want and we have what they want.
In our opinion, it was a really good fit. They've got a great video platform in their video search engine. They have fantastic video content partnerships, which gives them the right to sell ads around it. And, great technology that was incubated and born out of Autonomy, which is a big U.K. company.
Video companies, in the Internet space today, need distribution. Well, we're in the distribution business, the content distribution business online.
So to the extent we can come together, in order to take advantage of their video and their access to great video content and distribute it across [Burst Media’s] long tail ad network, it's a great fit.
The sort of dirty little secret about display advertising in the sector of the marketplace where we work is that prices aren't especially high. They're not as high as they should be for the quality and audience loyalty that their advertisers are paying to get access to. And the secret about video is, it's lumpy. There are a couple of places where there are big chunks of video, but it's not well distributed and it's not particularly relevant on a distributed basis, and we're going to fix that.
And why now?
Well, two willing parties... Blinkx was obviously willing to pay a terrific premium for our stock versus where it had been, which is undervalued and seriously in the doldrums over the last few years. So it was a win‑win‑win, I think, for all our stakeholders - certainly for our shareholders and for our customers and our employees.
Nothing, for now. Blinkx brings its AdHoc ad platform to the table, which is the thing that runs their advertising serving business. And of course, we've got adConductor and it supports not just ours but many customers as well. I imagine that over time - in this case I think is probably a number of years - we'll find ways to integrate these platforms. But at the moment, adConductor does one thing especially well and AdHoc does another thing especially well. And we'll take our time and figure out how to take advantage of what's best about both of them.
Well, as the announcement said, I'm going to be transitioning out of the company after a little while. And as I've told our employees today, 15 years is too long to be running anything. I'm enormously proud and grateful for the chances and the opportunities that Burst has given me. And it's been fun, since 1995, building this. But to be perfectly honest, I don't run the company anymore. I mean, we've got a great management team underneath that has been here. A lot of these guys have been here 10 years. The thing has been running and they've had the controls in their hands for a long time.
So I think it's actually one of the value adds of this transaction is the opportunity for new vision - same vision but new vision. And I think it's going to be good for our company. Our employees, it goes back to the beginning of what I said. We have what they want and they have what we want, they're additive to each other.
So the message to all of our people has been loud and clear. You know, Jarvis is going to transition out. David Stein, our other co‑founder is going to be transitioning out as well. Our CFO, Steve Hill - because companies don't need two CFOs - will be leaving, which is normal under these circumstances. Everybody else stays.
I would say that this, today's transaction, is about the business model online - the network business model online that's committed to creating incremental value in the display sector.
I believe that's always been, fundamentally, the differentiator about our company Burst Media. In that, we are not in the arbitrage business as our core competency. And the publishers that we've worked for for all of these years have depended on us as their first line of offense and defense to help drive revenue to their businesses. The network business has been built up, frankly, around other rules, other very lucrative rules, frankly - the shorthand version of which I've always felt was simply discounting premium ad space. And I certainly think the premium ad sellers and publishers would agree with that statement. Today, so would most of the agencies operating demand side platforms, and some of those things who feel that if they can automate it, we can automate it. If they can capitalize on the data, we can capitalize on the data and deliver that value directly to our clients.
Today's transaction with Burst is about adding value to our distribution network, and that value is the higher value of video that can accrue to both publishers and end users.
No, it does not.
I think it signals the next down payment on value. But again, “ad network” is a description that's used for so many things. There's no question that over the years we've sold our fair share of banner ads and pop up ads and cost per click ads, which is what it took in representing publishers outside of the top 100 comScore websites to keep ourselves in milk and honey.
But, to talk about the death of our ad network or the death of our business model would be to talk about the death of the value of the Internet to consumers. I mean, I don't see any evidence from where I sit that the sector of the marketplace that we represent – particularly the long and mid tail - is anything but robust.
So don't compare us to networks that have been chipping away, that have sort of been sneaking value out the backdoor of big websites. We're here supporting the value that gets created every day by publishers. As long as that value keeps getting created, then there is going to be plenty of room for our company and other companies like us to support it.
By John Ebbert