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UPDATE 2-RTL buys U.S. digital video ad platform to reach young viewers
July 31, 2014 / 8:45 AM / 3 years ago

UPDATE 2-RTL buys U.S. digital video ad platform to reach young viewers

* RTL Group to pay $144 mln for 65 pct stake in SpotXchange

* SpotXchange auctions over 1 bln advertising spaces per day

* Acquisition also give RTL access to young media users (Rewrites, adds co-CEO comments, background)

By Harro Ten Wolde

FRANKFURT, July 31 (Reuters) - European broadcaster RTL Group has agreed to buy a 65 percent stake in U.S. digital video advertising group SpotXchange, hoping to tap into a fast-growing market and get an idea of what drives young media consumers.

RTL, which is controlled by German media conglomerate Bertelsmann, will pay $144 million for the company which was founded in 2007 and now has more than 1 billion auctions of advertising space each day, it said in a statement.

As consumers increasingly use smartphones and tablet computers to watch videos and listen to music, traditional broadcasters such as RTL and rivals including ProSiebenSat.1 , are expanding their online media offerings.

They encourage customers of their television services to also use digital businesses, which include online videos, games, music and fan communities on social network sites.

The deal with SpotXchange will give RTL Group direct access to data about the media behaviour of a much younger audience.

These “Millennials”, a term used to define people who were born roughly between the early 1980s and early 2000s, are mostly active on online platforms and less eager to get information via traditional media such as television.

“For us this is a nice way to reach these so-called Millennials,” RTL’s co-Chief Executive Guillaume de Posch told Reuters. “It is a way to hedge our position, whether it is via our online platforms or our linear TV channels.”

A person familiar with the transaction said SpotXchange is expected to make $40 million in sales this year, which would be more than double last year’s total.

BIG DATA ELEMENT

RTL said global online video advertising is currently the fastest growing digital advertising segment and is expected to grow at a compound annual growth rate of 24 percent between 2014 and 2018, to reach $24.8 billion.

This growth is driven by so-called programmatic video advertising, the market SpotXchange is active in, which is estimated to increase to $15.4 billion in 2018 from $2.7 billion in 2013, according to RTL.

SpotXchange offers an electronic market place for online video advertising, where software algorithms bring publishers and advertisers together without a single person intervening.

Based on visitor data of the online video platforms, RTL will be able to get a picture of the young customer and customize its programme offerings. “In a way this acquisition has a Big Data element,” De Posch said.

RTL has been investing heavily in multi-channel networks on YouTube, which resulted in 16.8 billion video views last year, more than double the amount in 2012.

“We expect to more than double our online video views this year again, reaching around 40 billion,” De Posch said. “This should keep us easily in the worldwide top 10 ranking of online video views.”

The acquisition of SpotXchange is expected to close at the end of August. “They are not losing money,” De Posch said declining to give further financial details of the company. (Editing by Catherine Evans)

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