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Roku to Acquire Ad Tech Platform Dataxu

By Evan Niu, CFA - Oct 23, 2019 at 7:30AM

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The deal will help grow Roku's ad business as it competes with Hulu for ad dollars.

Roku's (ROKU -2.22%) advertising business continues to rapidly grow and evolve, and the streaming specialist announced this week that it would be acquiring Dataxu to build on that momentum. The Boston-based company operates a demand-side platform that helps advertisers create video ad campaigns, offering automated bidding and a self-serve channel to manage those campaigns programmatically across ad platforms.

Here's what investors need to know about the acquisition.

Roku platform interface displayed on a TV

Image source: Roku.

$150 million price tag

Dataxu has been looking to sell itself over the past year, hiring financial advisors last October to assist in the process, The Wall Street Journal reported at the time. Dataxu had hoped to fetch a valuation of $300 million after having raised approximately $87.5 million in private funding rounds over the years, according to Crunchbase.

Roku said it has agreed to pay $150 million in cash and stock for Dataxu, quite a bit less than Dataxu had been seeking. Dataxu had laid off roughly 30 employees in April, and the company still has around 300 workers -- including software engineers, data scientists, and analytics specialists -- that will be joining Roku's team. The transaction is expected to close this quarter, and Roku will discuss the deal in more detail on its third-quarter earnings call, which is scheduled  for Nov. 6.

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

Roku is No. 2 behind Hulu

Dataxu's tools can be used across regular TV, over-the-top (OTT) services, desktop, and mobile platforms. Scooping up the company will complement Roku's existing OTT ad business, which is already one of the largest in the U.S., trailing only Hulu, which is controlled by majority owner Disney (DIS -0.28%). Hulu's ad revenue is expected to jump 25% this year to top $1.8 billion, according to estimates from eMarketer.

Hulu said in May that it had reached 28 million subscribers, a few months after it cut the price of its most popular plan (which includes a limited amount of ads) to $6 per month. The tier that has no ads whatsoever costs $12 per month, and Disney is going to offer a bundle with Disney+, ESPN+, and ad-supported Hulu for $13 per month once Disney+ launches next month.

Roku is guiding 2019 revenue to over $1 billion for the first time, although that forecast includes both platform (mostly advertising) and player revenue. The tech company has brought in nearly $302 million in platform revenue through the first half of the year.

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