Telstra has splashed US$270m (AU$291m) to acquire the rest of video streaming company Ooyala. The move means the telco will beef-up its presence within the applications layer in a bid to become more than just a pipe.
Publishers are making much more money from video ads than display ads and the barriers to entry have fallen. At the same time, traditional broadcasters are streaming content to various devices in a bid to connect with audiences that are watching less traditional TV - and to better measure and target their audiences.
Ooyala powers the video capabilities of some major publishers and broadcasters, including ESPN, Telegraph Media Group, NBC Universal and The Washington Post. Its analytics mean they can optimise in real time and its recommendation engine suggests other videos to users that it thinks they will watch, keeping them on site longer.
Locally, the company's video technology helps power Foxtel's Presto streaming service, as well as video content for other News Corp and Telstra properties and numerous other publishers.
The acquisition means that Telstra can trap more of the value chain currently being captured by other companies using its infrastructure to transport their content and services. Other telcos are also trying to move away from being 'dumb pipes', with Optus parent company Singtel recently splurging on Adconion and Kontera for a combined sum of US$385m.
Some have questuioned the value of those investments, but in Telstra's case, Citi analyst Justin Diddams said the move made sense.
"The acquisition is consistent with Telstra's broader strategic push into the applications layer rather than purely offering access and connectivity," he said.
As the barriers to entry fall and audiences fragment, publishers are recognising that in a world of scale, there is gold within the niches.
John Treloar, Ooyala MD for Australia and New Zealand told AdNews last month that NetballTV, for example, would have a ready-made audience and interested brands. Equally, he said, brands will likely look at taking their content onto their own channels “because they want the data and ownership” and because they control the monetisation.
With Telstra owning the company it means the telco can also see what content is gaining traction across a huge swathe of publisher and broadcaster sites. Those publishers have rich audience data and Telstra has strong customer data.
Telstra CEO David Thodey said the acquisition "provides an opportunity for Telstra and Ooyala to establish a consolidated leading global company to deliver platforms and services on which the next generation of TV and video will be built."
See the full ASX announcement here.
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