Why TV Companies Want To Own Buying Platforms – And Why It Might Hurt Buyers

When Roku bought dataxu for $150 million on Tuesday, it said the deal would make it easier for buyers of all sizes to access OTT inventory at scale, and use Roku’s ID off platform.

Roku is basically trying to make more inventory, powered with better data, available to advertisers, said Frank Sinton, president and founder of Beachfront Media.

On paper, it’s a great plan. Dataxu’s self-serve platform will open Roku’s inventory to more buyers, growing programmatic access – which currently is just a fraction of digital video buying.

But when media owners buy DSPs, it could further fragment the market. Roku said it will continue working with other DSPs, but buyers will need to use dataxu to get the best access to inventory and Roku data, similar to how they need to work with Xandr to get access to AT&T subscriber data.

“You can see the playbook several times by now,” said Tal Chalozin, co-founder and CTO at Innovid. “A company has unique inventory and allows others to buy it, but if you use their own programmatic pipes, it’s better.”

Platform overload

In recent years, agencies have consolidated the number of DSPs they work with to gain efficiencies and reduce overlap.

“Agencies spend a ton of time consolidating reports,” Sinton said. “Managing and putting together information with multiple platforms becomes really onerous.”

Access to unique data and an easy route to unique inventory, which are the promises of Roku-owned dataxu and Xandr-owned AppNexus, can certainly attract buyers to a platform. But some buyers worry that if other media sellers take the same route and incorporate DSPs, they’ll be overloaded with too many platforms like they were in the early days of programmatic.

“There will come a point where marketers say it needs to be consolidated,” Chalozin said. “Otherwise it takes too much labor to buy or compare apples to apples.”

Is Roku worth it?

Buyers will have to decide whether access to Roku’s data is worth the added complexity. Roku can add dataxu’s robust TV data set to its viewership and ACR data to help buyers plan and buy for incremental reach, said Jonathan Steuer, chief research officer at Omnicom Media Group.

“They have the ability with a DSP to provide pretty smart targeting segments,” he said.

But because advertisers haven’t had much visibility into the Roku ID, they’re not sure it’s worth adding dataxu back into their preferred platform mix.

“Until very recently, Roku would not share any data back when you placed the buy,” said Philip Inghelbrecht, CEO of advanced TV agency Tatari.

Plus, Roku only sells a portion of the inventory on its platform, most of which lives on The Roku Channel and other long-tail apps. Publishers and networks negotiate with Roku to sell a majority of their inventory directly first.

So while the acquisition will benefit smaller advertisers who don’t have an agency with direct relationships with the networks, large spenders are still going to the networks directly first.

“As far as we’re concerned, if you want ABC you buy from ABC, and if you want Hulu you buy from Hulu,” Steuer said. “It makes it easier to buy something that’s already a scarce commodity.”

Inventory owners pressured to build walls

Owning a buying platform offers Roku and other media sellers more control over their inventory and a better ability to monetize it.

“If you own the DSP, then of course you own that margin as well,” Inghelbrecht said.

Roku is not the only TV media owner to figure this out. AT&T bought AppNexus to own an end-to-end ad tech stack to control the monetization of its inventory, and FreeWheel began making DSP integrations under Comcast after looking at dataxu as a possible acquisition target earlier this year.

It’s about having a platform to grow the ad business faster with more leverage,” said Dave Morgan, CEO at Simulmedia. “Roku has control over its inventory [rather than] just letting other people plug into its platform.”

It’s the same playbook used by Google, Facebook and Amazon to leverage both sides of the market. “The only way to compete is to build your own walled garden,” Sinton said.

While Roku remains an open platform, buyers are waiting to see how the acquisition impacts its relationship with other DSPs, and whether dataxu, which has integrations from Sky TV to Amazon Fire, will have to reconsider those relationships in light of its new owner.

“You want to believe it’s going to stay open, but you also have to understand there are market dynamics going on,” Sinton said.

Others argue Roku will have to stay open because it isn’t big enough to close off completely, especially because it doesn’t have selling rights over the majority of its most premium inventory.

Either way, publishers are moving closer to the buy side as they automate more of their supply. For buyers, that could lead to a friction point of having to buy through too many walled gardens not too far down the road.

“More walled gardens are not helpful,” Steuer said. “If I’m a marketer, I want to allocate my budget as broadly as possible and understand who I’m reaching. Walls don’t make that easier.

Correction: This story previously said FreeWheel launched a DSP. FreeWheel began making direct DSP integrations last year but did not launch a DSP.

 

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