DG Q3: Online Platforms Grow, Latin America Drags

DG CEO Neil NguyenNearly three months after DG decided to sell its linear TV ad-delivery business to video ad-management company Extreme Reach for $485 million, it is enjoying revenue momentum from its online platforms.

Among the key results from DG's Q3:

  • Online revenues were up 13% to $38.2 million.
  • The online segment's margins improved to 25% from 13% a year ago.
  • Mobile impressions were up 192%, while revenues are up 86%, albeit from a small base (the mobile business launched in 2012).
  • Revenues from TV fell 13.6% to $51.9 million. The decline was attributed to the $2.7 million in political ad spending it garnered during the 2012 presidential and national elections.

According to CEO Neil Nguyen, platform customers now represent 56% of online revenues, compared to 48% last year.

"Our DG MediaMind platform products include 13 separate chargeable services ranging from basic ad serving and campaign management for rich media, mobile and display, as well as new channels like social," he said. Read the earnings release.

DG will not be out of TV ad services until Q1, when it expects the Extreme Reach deal to clear. Antitrust regulators have granted approval for the hand-off to go forward; the last hurdle is the assent of stockholders, considered a formality.

It's worth noting that the TV assets brought in half of DG's roughly $400 million in revenues in 2012. Although TV remains so much larger from a spending standpoint than online, the potential is limited from a technology perspective, Nguyen has said. For example, DG provided ad serving to TV, and as the media world moves toward greater automation in processing ad sales, demand for such "plumbing" will fall off.

Plus, there is an expectation of a roughly five-year wait for the "convergence" of online and TV advertising to become a significant business. DG felt its time would be better spent building a focused digital business.

Perhaps more than those factors, the sale of its TV assets to Extreme Reach will ease DG's debt burden after acquiring a succession of digital ad platforms, including MediaMind for $414 million, rich media firm EyeWonder for $66 million and semantic ad-technology provider Peer39 for $15.5 million.

Among DG's priorities is growing the analytics offering at Peer39, which posted a 36% gain in revenues.

As DG concentrates its efforts on North America and the APAC countries, the company is starting to experience some weakness in Latin America, offsetting growth in places like Australia. And there remain other imbalances that need to be addressed.

"We did have some sequential declines in Latin America, as clients began to focus more on social and other video channels, which impacted DG's display business there," Nguyen said. "In North America, the agency side of the business has been strong, but there has been some difficulty on the publisher side. Nevertheless, there's a trend from publishers moving from serving their own video ads to using third parties like DG. Between that, and greater traction with [consumer packaged goods] marketers and auto companies, we expect to see greater benefits and revenue growth."

Hoping to demonstrate that DG can make a successful transition from TV to online-only, Nguyen pointed to a deal with Nissan for its integrated online video platform. Additionally, Toyota worked with DG on a brand campaign in Q3, involving dynamic creative optimization.

"So far, online revenues for auto vertical are up 33% and we are optimistic about our ability to grow our footprint with auto advertisers," Nguyen said.

 

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