Videology Raises $60 Million, Prepares For Overseas Expansion And Convergence

Scott Ferber, CEO, Videology 2013The digital video ad market has been on fire with annual double-digit growth for the last four years. A sampling of headlines from the past week shows the heat is continuing into 2013: Tremor Video filed with the SEC to go public, a consortium of video ad rivals formed a group to promote a single standard for viewability, and now Videology has raised a whopping $60 million round.

“When you have people offering to give you money, why not take it?” reasoned Videology CEO and founder Scott Ferber in an interview with AdExchanger. “We plan to put it to good use, particularly as we work to build out our efforts on the supply side and our global presence.”

Videology evolved over the past six years, from its initial incarnation as a video content network and ad server named TidalTV to a broadband ad network, and finally to an advertising marketplace connecting TV and online video.

The financing, Videology’s fourth, was led by Catalyst Investors along with previous backers New Enterprise Associates, Valhalla Partners and Comcast Ventures. Videology was also able to attract new investor Pinnacle Ventures.

Videology’s strength remains as a video ad server and distribution point for marketers and agencies. But it has begun to serve publishers in the capacity of a video supply-side platform, in part by following acquisitions like last fall’s DSP LucidMedia with buying publisher-facing data management platform Collider in August. It has also partnered with mobile analytics provider Korrelate and offline market researcher Kantar Shopcom to help round out its existing services, as marketers struggle to catch up with consumers’ changing media diets on smartphones and tablets.

“There’s a lot of talk about convergence between TV, the PC and mobile, and it’s the right time,” Ferber said. “But the industry still has a long way to go. I’d say that in three to five years, we’ll be talking about convergence as an afterthought, as if there really was only video, not ‘television’ or ‘mobile’ or ‘DVRs.’ It’ll just be video, and that’s what we’re preparing for.”

There are no imminent plans to use the funds for acquisitions, though Ferber did say the second half of the year or early 2014 could bring M&A moves.

From the looks of the video ad space and its tremendous growth – eMarketer estimates US digital video ad spending will nearly double in four years, to $8 billion in 2016 – it would seem to support an array of players in the space. But Brian Wieser, a Pivotal Research analyst writing in a note about Tremor’s filing, so far sees YouTube as the big winner and others scrambling to capture the rest of advertisers’ video budgets. YouTube probably garnered $1.3 billion in ad sales last year, between 25% and one-third of the video market, Wieser surmises.

“Our view is that the rising tide of online video advertising does not necessarily lift all boats in the mid- to long-term even if it does at present,” Wieser says. The expectation is that leading players will be able to fight it out for the greater share of ad spending as well as publisher inventory access in the near term. The top 10, as ranked by comScore in March, are YouTube, BrightRoll,, LiveRail, Hulu, Specific Media, Tremor, Auditude, TubeMogul and CBS Interactive.

But looking out at the next five years, the direct sale of video inventory is not a business model with staying power, largely because there’s very little to distinguish one entity from another, particularly as media buying becomes more automated. That means there will be enough to go around to make the number two or three player in video after Google/YouTube very successful.

The real value will be in who has the best system for letting buyers and sellers connect, as well as who has the best content. The latter reason is why Yahoo appears to be interested in buying Hulu. Though popular, Hulu is a cause for concern because it’s so dependent on the whims of its joint venture parents, particularly ABC and News Corp., which have a strong interest in protecting their broadcast assets and the related online video content sold under their individual banners.

That’s the rapidly morphing landscape that Videology, Tremor and the rest find themselves in right now. One thing that has helped to elevate online advertising is the changing nature of presenting quality content. Ferber pointed to Netflix’s turnaround, which was driven partially by excitement over the introduction of original series like House of Cards, starring Kevin Spacey, and the revival of former Fox Broadcasting show Arrested Development. Of course, Netflix digital video is strictly subscription-based, not ad-supported.

The future is largely undecided in terms of which model will define “premium” online video. But even YouTube is exploring the idea of subscriptions, so a hybrid model, which is what rules cable TV, is increasingly likely to be brought to bear on web-based video, since the production, marketing and distribution costs are only going to rise.

“What the introduction of a subscription model does is either make advertising unnecessary or, if it’s part of the mix, makes you up your game in terms of targeting and ad quality,” Ferber said. “I don’t think the impact of introducing subscriptions to online video is negative. It’s just different.”

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