• Ad tech company Magnite is acquiring SpotX, a platform for connected TV and video advertising, for $1.17 billion in cash and stock.
• The acquisition of SpotX, a video supply-side platform, from parent company RTL Group should help deepen Magnite's strategic play in streaming ads.

Ad tech player Magnite is acquiring SpotX, a platform for connected TV and video advertising, for $1.17 billion in cash and stock, the companies announced Friday.

Magnite stock was up more than 26% after the deal was announced. Magnite helps publishers of websites, apps, connected TV channels or other digital media properties sell space across their media. Now Magnite may be even more set for a standout 2021 as it rides on the back of the booming connected TV, or CTV, sector. The acquisition of SpotX, a video supply-side platform, from parent company RTL Group should help deepen that strategic play. 

The companies said SpotX's purchase price consists of $560 million in cash and 14 million shares of Magnite stock, for a total of $1.17 billion based on the closing price of Magnite stock as of Thursday.

SpotX was a competitor of Magnite before the acquisition, along with companies such as PubMatic, which recently went public. Other competitors include Google, which operates at multiple links in the supply chain, Comcast-owned FreeWheel, Index Exchange and OpenX. 

The deal is expected to close in the second quarter of this year. The company said it will be the largest independent CTV and video ad platform in the programmatic space once the deal closes. The company does serve clients on other formats, including display, mobile and audio. 

CTV is a smaller piece of Magnite's overall business, but a big growth opportunity. A Susquehanna note in December wrote that about 80% of its revenue was from desktop and mobile, but that "CTV is the crown jewel." Connected TV has been a white-hot sector in the pandemic, which dramatically accelerated what industry experts thought would be a multiyear transition to CTV. The more people staying home and streaming ad-supported movies and shows, the more opportunities there are for ad tech partners to show them ads on platforms. 

For its part, Magnite has said that its total CTV revenue grew over 50% year over year in its third quarter of 2020. Magnite also said that the number of advertisers using its audience targeting features grew two and a half times between its third quarter in 2019 and the same period in 2020.

Magnite says it has an exclusive relationship with Hulu and its owner, Disney. It also works with other services such as Sling TV, Fubo TV, Philo and Pluto TV, which is owned by ViacomCBS. It also partners with broadcast channels, including Fox and Discovery, on their CTV app offerings.

Though historically advertisers worked with a slew of supply-side partners, there's been a trend of limiting that spend to fewer partners. Advertisers and agencies are looking to do business with fewer supply-side platforms to avoid inefficiencies and the potential of fraud. Buying competitors to increase its scale and inventory could be a way for Magnite to give itself a competitive advantage over its peers.

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