M&A Alert - April 2, 2010
Google Acquires Online Video Platform, Episodic
Transaction Overview
On April 2nd, 2010 Google announced the acquisition of an online video platform, Episodic.
Target Description
Episodic offers an online video platform that enables on-demand video streaming, in-video advertising insertion, credit card-enabled purchases, real-time analytics and video content management capabilities. Episodic offers their platform to marketers, advertisers and publishers to provide video play capabilities on their web or mobile sites and enhance revenues via video advertising. Founded in 2007, Episodic is based in San Francisco, CA and has raised $2.5mm in funding from Granite Ventures (Partner: Savinay Berry). Episodic was founded by Noam Lovinsky and Matias Cudich, the latter an ex-Google employee.
Buyer Description
Google offers targeted online and mobile search advertising services to users and advertisers. Google bought YouTube, an online video site in 2006 for $1.5b. YouTube reportedly streams over one billion video per day worldwide. Google was founded in 1998 and is based in Mountain View, California. Chad Hurley, Co-Founder and CEO of YouTube appears to be the key executive sponsor of the transaction. Episodic’s employees will join YouTube upon acquisition.
Transaction Parameters
Transaction value is not disclosed.
Strategic Rationale
YouTube has been focused on building a self sustaining revenue stream over the past year and is expected to be cash flow positive by the end of 2010. While Episodic’s advertising platform and technology may assist Google’s efforts to drive revenues from YouTube’s significant audience, we believe this is likely part of a strategy to offer a robust video streaming platform to corporate customers as a service. Much like how Brightcove has positioned itself, a clear extension of YouTube’s service would be to offer a video streaming management platform with integrated advertising capabilities to online and mobile publishers. It’s particularly interesting as internet connected television become reality. Interestingly, Google was rumored to be interested in Brightcove last year. Other recent related acquisitions by Google include acquiring on2 Technologies, a video compression technology provider, in August 2009 for $133mm.
Architect Partners Observations
Online video is one of the key acquisition themes playing out currently. Recent comparable transaction of note include Walmart’s purchase of Vudu, Limelight’s acquisition of Eyewonder, Qualcomm’s acquisition of Digital Fountain, Akamai’s purchase of Acerno and Comcast’s acquisition of thePlatform.