Blinkx buys Burst for $30 million to boost online TV

LONDON (Reuters) - Online video search firm Blinkx is to buy online ad network Burst Media for $30 million to help build personalized online TV channels that should command premium rates from advertisers.

Online advertising has, for some time, been the fastest growing segment of the overall ad market, with online video ads running before or after video clips achieving the highest prices from marketers.

Blinkx, which already shows video to an audience gathered from more general sources, said the deal would give it access to Burst's audience of over 130 million unique users and its partnerships with more than 1,000 niche websites.

Chief Executive Suranga Chandratillake said advertisers were willing to pay much higher sums if the ad was directed at an audience known to be interested in the product or subject.

"If it's a pharmaceutical ad that appears only on video that is talking about very specific health problems, then the price we can charge per impression of those ads is much much higher than the price for something more general," he told Reuters.

"The Blinkx audience is currently gathered from more general channels, this gives more scale (for a targeted audience)."

The group announced the takeover as it released a trading update predicting a rise in full-year revenue to more than $65 million, up around 90 percent on last year. It expects to report an operating profit above the current analyst consensus estimates of $6.7 million for the year ended March 31.

The trading update and the deal with Burst sent shares in the group up 10.2 percent to 122 pence on Friday, while shares in Burst were up 390 percent to 23.93 pence.

The offer represents a premium of around 400 percent to the mid-market closing price on Thursday but Chandratillake said the firm had been penalized by the market in recent months which had started to question its future.

"Up until now, the primary barrier to further television advertising budgets moving online has been online video's inability to match the sheer scale of audience that television can deliver," he said.

"The acquisition ... will allow us to overcome that challenge: by fusing Blinkx's unique patented technology and large video index with Burst's massive reach, we will have the potential to create personalized, online television that is watched by hundreds of millions of users."

(Editing by Ben Hirschler)