Rubicon Project has snapped up iSocket and Shiny Ads, two companies in the rapidly emerging category of automating direct, negotiated deals between ad buyer and publisher. The total cost of both deals is less than $30 million, mostly paid in stock, according to a press release. The bulk of that $30 million likely went to iSocket, according to a source familiar with the deal.
Rubicon's acquisitions will give it access to deep back-end technology built by iSocket and Shiny Ads, along with engineers from both companies familiar with working in publisher ad servers. Rubicon's work on deal automation to date had more been on the front end.
"With iSocket they acquire legitimacy, marquee relationships, and buy-in from big time NY publishers, like Condé Nast and IAC. That publisher buy-in has a domino effect," said Dina Srinivasan, managing director, emerging media for Kantar Media SRDS. "With Shiny Ads, Rubicon is able to quickly increase their foothold in the marketplace. It helps both with optics and marketshare in their efforts against Google."
Post-acquisition, Rubicon should now have pipes in place for 1,000 to 1,500 of the top 2,000 publishers that agencies are most interested in buying direct from, a source familiar with the deal estimated. Another source put iSocket's publisher count at 300, Shiny Ads' at 30 and Rubicon's private marketplace publisher connections at over a thousand -- though the latter isn't strictly automatic guaranteed.
The acquisitions position Rubicon to capitalize on the growing "orders" business. Programmatic direct has just a fraction of real-time bidding's market share, but it's projected to grab a larger slice of programmatic spend. According to eMarketer, programmatic direct will grow from $800 million this year to $8.5 billion in 2017. During that same time, RTB will grow from $9.25 billion to $11.84 billion.
While the programmatic direct market now seems poised to explode, iSocket and Shiny Ads may have come too early to the programmatic direct space to become strong independent player. “It’s good to be an innovator, but it’s never good to be too far ahead of the market when you’re a little company,” said Susan Bidel, a senior analyst at Forrester. "It would appear that the sellers are ahead of the market, which is new," she added.
For publishers, programmatic direct provides automated access to premium CPMs, a great added value. On the demand side, programmatic direct's primary value is in reducing man hours. But agencies and brand advertisers with millions of dollars in budgets haven't cared too much about automating directly negotiated ad deals to date.
Once agencies change their tune, programmatic direct players will have access to the two-thirds of digital ad spend that hasn't yet been automated, said Ben Trenda, CEO of Are You a Human. He is a former Rubicon employee and former CRO of iSocket.
"The existing programmatic platform companies are competing for their share of the roughly one-third digital ad spend that's already been automated, cannibalizing the inventory that used to go to ad networks," Trenda said. "This deal gives Rubicon a huge lead in going after the other two-thirds, the part still being done with paper contracts."
Rubicon positions itself as a market leader with the acquisition. “Consolidating the guaranteed direct orders market with these acquisitions, combined with our existing direct order technology and scale, solidifies our market leadership in this rapidly growing segment,” CEO Frank Addante said in a statement.
Among the SSPs, PubMatic just started its programmatic direct product, and OpenX still doesn't have a product, a source said. Rubicon's solution was already ahead of those competitors, multiple sources confirmed. And with the acquisition of iSocket, it snapped up the leader among companies specializing in the space.
Programmatic direct specialists left post-acquisition include BuySellAds and AdSlot. Some companies have gone sideways into the space: AppNexus launched Twixt, a programmatic direct interface, in April, and Yieldex entered the programmatic direct market recently as well. Bionic Ads, a division of media planning tool Next Mark, has a programmatic direct offering.
The most obvious player of all is Google. It's signaled it's entering the space with Direct Deals, first launched in 2012, but it still doesn't have much traction with its product, multiple sources confirmed. In the Forrester Wave conduced by Bidel six months ago, it received zero out of five in the category evaluating programmatic direct.