European broadcaster ProSiebenSat.1 has agreed to acquire a majority stake in Virtual Minds, a holding group of companies in the advertising technology (ad tech) sector for an undisclosed sum. The acquisition is carried out by the broadcaster’s subsidiary ProSiebenSat.1 Digital. In the deal, ProSiebenSat.1 will hold a 51.0% stake in Virtual Minds. German internet firm United Internet Media will hold 25.1% and the remaining shares remain distributed among Virtual Mind’s founders and management.
Virtual Minds is composed of 11 companies, which are headquartered in different locations throughout Germany. These include: Supply Side Platform (SSP) Yieldlab, Demand Side Platform (DSP) Active Agent, Adserver Adition and Data Management Platform Adex. Key competitors are Improve Digital, Rubicon, Appnexus and Pubmatic.
ProSiebenSat.1’s foray into digital advertising technology comes 11 months after its main rival, RTL Group, set the pace by acquiring a 65% stake in SpotXChange, a leading video ad tech firm, for $144m. Earlier this year, RTL also invested in Clypd, a firm focussing on applying programmatic advertising models to TV. Underlying these acquisitions is a common logic: for media owners, control over advertising technology increasingly is a matter of controlling their digital destiny.
Although ProSiebenSat.1 and RTL Group respond to the same macro-change in the market, their acquisitions could not be more different. With SpotXChange, RTL Group bought into one of the largest independent video specialists that had not yet been scooped up. At the time of acquisition, SpotXChange already had a strong global footprint and a market-leading position in the US. While RTL Group intended to help SpotXChange further penetrate the German market, it bought into a business that was already internationally scaled and established. SpotXChange also takes sides in the advertising value chain, serving only publishers, and not players on the demand side.
In contrast, ProSiebenSat.1’s Virtual Minds acquisition is much more contained in scale. The broadcaster has bought a German set of companies with a comparably limited international footprint. The companies subsumed under the Virtual Minds umbrella also do not exclusively focus on publisher monetization, but span across the advertising value chain, comprising of several components from the demand- to the supply-side. While Virtual Minds also offers video advertising, it is not a dedicated video expert like SpotXChange. The requirements of programmatic video advertising are very different from that of banner advertising and other formats. Few companies do everything equally well. Yet Virtual Minds still is a good fit for ProSiebenSat.1. The broadcaster’s digital strategy is much less video-centric than that of other broadcasters. ProSiebenSat.1’s ‘Digital and Adjacent‘ business segment contains weather, e-commerce and gaming companies alongside the video business that much closer to a broadcaster’s legacy. A specialist for video would not have allowed ProSiebenSat.1 to bring programmatic capabilities to its entire digital portfolio. The renewed merger talks between ProSiebenSat.1 and publishing group Axel Springer (announced 6 July 2015) add another component. Should this merger proceed, a diverse set of smaller ad tech companies with various capabilities would allow a better application to Axel Springer’s digital portfolio which includes e-commerce and classifieds, than a global video specialist.
In summary, RTL Group’s move into global ad tech through SpotXChange was an offensive move, enabling the company to strategically develop the programmatic business and become an internationally leading player. ProSiebenSat.1’s acquisition appears more defensive. Rather than acting on programmatic as a pathway into a new, global business, the Virtual Minds acquisition will primarily help to prevent other, predominantly international players, from colonising the German programmatic market.