Streaming video is advertisers’ shiny new toy.
But tech companies that started in mobile display are optimistic about their prospects for sharing in those video budgets.
Take PadSquad, which launched in 2012 as a software vendor to help publishers serve mobile display ads. PadSquad also built an in-house creative agency for brands shortly after launch.
Now, it’s breaking into connected TV (CTV).
On Thursday, PadSquad acquired technology from ad monetization software company Source Digital, including a video ad builder, an ad server and content recognition technology. Terms of the deal were not disclosed.
Until now, PadSquad had hardly any presence in the TV and streaming space outside of display videos served in browser environments, Daniel Meehan, founder and CEO, told AdExchanger.
With the new technology, PadSquad plans to develop interactive ad units that will be embedded within a video stream, including on CTV.
Keen on CTV
The need for CTV ad tech is clear as streaming continues to grow, but acquisitions don’t fund themselves.
Last spring, PadSquad secured funding from private equity firm Star Mountain Capital to pursue acquisitions that would grow its core digital ad serving model. (The company declined to share how much funding it snagged.)
PadSquad has always touted innovative ad formats for mobile. But once its clients started asking for instream video products, it had to come up with a solution so clients wouldn’t seek out other video options.
The company inked a partnership with ad server Innovid earlier this year to start creating interactive ads for CTV. But buying Source Digital’s video ad tech, which includes video content recognition technology, made sense as a next step because PadSquad can use it to identify opportunities for interactive ads based on what’s happening on-screen.
Video content recognition tech is “really where the rubber meets the road” when it comes to PadSquad’s CTV ambitions, Meehan said.
The transfer of assets also appears to make sense for both sides. Source Digital is a software company that doesn’t work directly with brands, so “PadSquad is better equipped to commercialize these video assets with advertiser clients,” Matthew Fusco, chief operating officer at Source Digital, told AdExchanger.
Fusco said that divesting this part of its business gives Source Digital room to focus on its publisher business, which includes software designed to help publishers sell inventory.
Get recognized
PadSquad, meanwhile, wants to drive results for brands.
The rationale behind PadSquad’s acquisition is rooted in a desire to get its hands on more content recognition technology, Meehan said.
Source Digital’s content recognition tech is wired to identify specific items in a scene, which it can use to pinpoint interactive ad unit opportunities within its video ad building suite. For example, if an actress is wearing a yellow dress, PadSquad can trigger an interactive ad unit for a brand that sells a similar product.
PadSquad also plans to make some of these new ad units shoppable, although advertiser adoption may take a little longer because shoppable ad units are still pretty new for video channels – and especially for TV.
But helping advertisers increase their return on ad spend is a “huge component” of this acquisition, Meehan said. According to PadSquad’s research, viewers who see an interactive ad unit are 15% more likely to purchase a product compared with viewers who see a standard video ad.
Source Digital’s ad server connects these ad units through supply-side platforms, including Xandr and Magnite. Advertisers can buy their ads either directly through PadSquad, or through a private marketplace within a DSP of their choice, Meehan said.
Making it to market
For now, though, the product for CTV is ahead of customer demand. Most of PadSquad’s clients are buying instream video ads on mobile and display. Advertiser adoption is slower going on CTV because it’s a net-new channel for PadSquad.
PadSquad’s next step is testing these new ad solutions with its brand clients and its ad verification and measurement partners, which include DoubleVerify and Oracle’s Moat.
The company also hopes to attract new, video-focused advertisers that may not have considered PadSquad in the past, Meehan said.
The company expects its new ad units to start attracting more CTV budgets from advertisers by Q4 of this year, he said, and acquiring the right technology to do so is only phase one of the process.
