Deeper Dive—Why Roku buying Dataxu is a big deal

Roku OS
Regardless of any potential issues, the deal just made Roku into an even bigger player in the digital TV advertising space. (Roku)

Roku made a splashy announcement this week when it bought independent demand-side ad platform Dataxu for $150 million, a deal that will disrupt the ad-supported streaming market.

“TV advertising is shifting toward OTT and a data-driven model focused on business outcomes for brands,” said Anthony Wood, chief executive officer at Roku, in a statement. “The acquisition of Dataxu will accelerate our ad platform while also helping our content partners monetize their inventory even more effectively.”

The acquisition, which is expected to close in the fourth quarter, will give Roku a world outside of its devices and platforms where it can sell inventory through Dataxu’s self-serve ad platform, according to TV[R]EV co-founder and lead analyst Alan Wolk.

Aman Sareen, CEO of ZypMedia, said the deal makes sense alongside other consolidation in media and TV advertising.

“We continue to see a lot of consolidation in the next generation of TV advertising space, as major players are lining up total solutions – WarnerMedia with the Xandr acquisition, and the Comcast/NBC initiative. We continue to see strong and robust growth and believe that the future for demand-side platforms is linked to strong integrations and relationships with inventory owners, and strong trusted channels with large national and local advertisers,” Sareen said.

Frank Sinton, president and founder at Beachfront Media, pointed toward advantages and disadvantages for everyone impacted by the deal.

“On one hand, it's supportive of Roku's aspirations to compete with Amazon and Google. Roku now looks a lot more like those guys. They sell ads. They have a data walled garden. And now they have a self-serve buying platform,” said Sinton. “On the other hand, there is economics conflict between the Roku and Dataxu businesses. Demand-side platforms work for ad buyers with a goal of driving prices down. Roku is in the business of increasing the yield of its inventory. It will be interesting to see this complex dynamic shakes out.”

He also said it will be interesting to see what Roku's strategy will be for monetizing third-party OTT inventory.

As Roku’s advertising strategy gains more bulk and scale, some in the industry like MadHive CEO Adam Helfgott are worried that content and distribution channels are becoming too entwined with ad networks.

“On the surface, Roku’s acquisition of Dataxu will help advertisers more easily buy ads,” said Helfgott. “However, the Dataxu acquisition - as well as AT&T’s AppNexus acquisition - starts to build walls around the content and distribution channels that used to be more democratic - effectively creating new walled gardens within the broader CTV ecosystem. Even if Roku allows other DSPs to play in their garden, they are still creating significant advantages for themselves.”

However, Helfgott also said that Roku’s Dataxu deal reinvigorates the role of supply-side platforms, turning them into the “pipes between the gardens and the inventory – making them potentially more meaningful.”

In a blog post, Wolk said he spoke with Scott Rosenberg, general manager of Roku’s platform business, who said the deal is about making OTT advertising more accessible to a broader range of marketers. Wolk said that while it’s certainly a good thing to bring targeted OTT advertising opportunities to more brands and companies, he questioned how mega-marketers like Apple and Pepsi would feel about having their expensive campaigns running alongside more run-of-the-mill ads.

He imagined that if that does become an issue, Roku could create a two-tier system where larger advertisers can run ads on more expensive platforms where they’ll be in the company of other marketers their size.

Regardless of any potential issues, the deal just made Roku into an even bigger player in the digital TV advertising space.