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Bulking Up
Go big or go home.

That appears to be the pay TV industrys current mantra, as distributors and suppliers face the realities of a
consolidating business that is also being disrupted by a shift toward skinny bundles and the onslaught of popular
mobile-focused, over-the-top video options.

As consolidation has played out among some of the nations largest distributors with the recently consummated
AT&T-DirecTV merger and a proposed deal to combine Charter Communications with Time Warner Cable and Bright
House Networks the wave is now sweeping over the advanced advertising technology sector.

Barely a week goes by without a deal in which an ad-tech vendor is acquired by a direct or tangential rival, or
swallowed whole by a multichannel video-programming distributor eager to shore up its own advanced-video strategy
for a new class of services aimed at elusive millennials and other viewers who are increasingly gravitating to
smartphones and tablets.

The ad-tech sector remains ripe for even more consolidation amid a digital-video market that is littered with smaller
vendors and suppliers that will need to scale up to survive, let alone thrive.

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Theres an overabundance of ad-related solutions, Tim Hanlon, founder and CEO of The Vertere Group, a boutique
investment advisory and strategic consulting firm, said. You name it, and there is a point solution for a point solution
for just about everything.

There are five to six companies on the market for every ad-tech point solution, Hanlon estimated. And thats arguably
four to five too many, he said, adding that the situation is overcomplicating the digital advertising complex It
screams for more consolidation and simplification.

And those shouts are apparently being heard, as an increasingly number of those companies have either bought in or

have been bought out (see sidebar).

But companies that dont make a move soon could be on the outside looking in, if the venture- capital community
loses its enthusiasm for technology thats focused on the advertising solutions or if backers are frankly getting itchy to
monetize existing investments, Hanlon said.

Going public as YuMe and Tremor Video did in 2013 isnt necessarily the right move, either. Both firms are now
driven by quarterly results, and thus challenged to pivot and evolve as rapidly as private companies can.

The ad-tech bloom is off the rose, so to speak, as things change more quickly and as investments become longer
and longer to monetize, Hanlon said.

MAKING THEIR MOVE

The AT&T-DirecTV deal is a hybrid in the sense that it involves both pay TV distribution and ad technology the latter
coming by way of AT&T AdWorks, which will now look to link its TV Blueprint data-driven platform to DirecTVs
addressable advertising capability under the new banner of AddressablePlus.

We believe that were giving advertisers the ability to reach their target audiences at scale, Rick Welday, an AT&T
veteran who was recently named the president of AdWorks, said. Were starting from a position of strength.

DirecTV, the No. 1 U.S. satellite-TV provider, will add about 12 million addressable homes to an AdWorks TV
Blueprint platform that already had access to data from 70 million homes.

AT&T AdWorks has already begun the process of developing a more-integrated offering. Job one for me is to get the
organization settled, Welday said. After that, the division will look to pull together the assets and enhance the
platforms data capabilities.

Those enhancements will play up cross-screen opportunities and AT&Ts mobile platform. Further down the road, we
will also be able to incorporate some of our exposure to the connected car business, he said.

BlackArrow, a dynamic ad-insertion company that cut its teeth on cable set-top video-on-demand, was rumored to be
on the block for more than a year when it pulled the trigger on a deal last week to be acquired by Cross MediaWorks,
a company that aggregates local linear TV ad buys for cable operators and other MVPDs.

The deal, they said, essentially combines vendors that have a similar set of major MVPD clients, but also enables
them to cover the gamut linear TV, on-demand, and emerging OTT and mobile video platforms.

Why do the deal now? The big drivers were the changing landscape and the desire to extend advanced advertising
to more platforms and provide an integrated view across them, Nick Troiano, the CEO of BlackArrow, who will now
serve in that role at Cross MediaWorks, said.

While VOD advertising continues to be a growing business, 90% of ad revenues still come by way of traditional linear
TV, so the combined company can cover both bases. The combination just rounds out the whole platform play,
Stephanie Mitchko-Beale, Cross MediaWorkss chief technology officer, said.

And weve always believed that scale matters, Troiano acknowledged, noting that the industry will need a large,
independent ad-tech and media solution provider to turn to as more vendors get snapped up by major distributors
like Comcast, which also happens to be a BlackArrow customer.

Ooyala, an online video specialist thats part of Australian telco Telstra, jumped headlong into the whitehot
programmatic advertising sector last fall when it acquired Videoplaza. The integration is largely done, as Ooyala has
shed the Videoplaza name completely.

Ooyala decided to buy in because it wanted to get a foothold in the programmatic TV/video market while it was still in
its infancy, senior vice president of ad tech Sorosh Tavakoli said.

Its gradually maturing, and we definitely want to be part of that maturing process, Tavakoli said.

By bolting Videoplaza to its larger platform, while still offering separate programmatic services, Ooyala said it believes
it can stand out in a market bursting at the seams with vendors that provide one-off solutions.

We believe differentiation will come in not around enablement but [through] data, analytics and insights, he said.

Ooyala, which also counts clients such as Univision, NBCUniversal, Comedy Central, Frances M6, Swedens TV4
and Spains Mediaset, might not be done buying, as we have all ears open to M&A opportunities, Tavakoli said.

Another ad-tech focused company that could benefit from ongoing MVPD consolidation is Canoe Ventures, which is
jointly owned by Comcast, TWC, Cox Communications and Bright House. Charter, which started off as a Canoe
partner before dropping out later, might grab an oar and rejoin Canoes crew.

But nothings official yet. Canoe is continuing talks with various MSOs about joining up within the next year or so, said
Chris Pizzurro, head of product sales and marketing for the J.V.

STAYING ABOVE THE M&A FRAY

Despite the volume of ad-tech deals, not all companies are eager to jump into the fray.

None of those deals really affects us first-hand, Mark Lieberman, president and CEO of Viamedia, said, noting that
some of them run parallel to his business, which is also trying to take advantage of the ad dollars flowing from HuluTV
into the digital realm.

But the flurry of M&A action, he said, shows the importance of ad-tech coming to television, and that TV distributors
and even the agencies are looking for solutions that they are accustomed to on the Internet side. The result is that the
TV industry is now more attuned to the power of data and being able to take back some of those digital dollars, and
thats something weve been very focused on.

Viamedia, which launched a programmatic platform called Placemedia in September of 2013, has plenty of scale now.
The company has more than 450 employees, including 300 sellers who are working with more than 10,000 local
advertisers serving up about 1.2 million ads each day.

That gives Viamedia the heft it needs to pursue opportunities on its own, including working with MVPDs that are
focused on ad-serving to IPTV environments on the set-top box level, and are looking to build strategies that rely on
best-of-breed solutions, Lieberman said.

But Viamedia is also on the lookout for opportunities to buy other companies, he conceded, so long as they would
allow it to remain relatively agnostic, because MVPDs might prefer using one vendors ad solution over anothers.

Wed be concerned about losing our position as an independent, honest broker looking for best-of-breed solutions,
he said.

And having larger, though independent, advanced advertising companies still in the mix could become increasingly
important as others are snapped up.

The ad-tech sector faces challenges as it consolidates, but broader, multifaceted marketing technology companies

remain attractive to VCs, as the television world has its digital transitional moment, Hanlon said.

While that climate favors IP- and multiscreen-focused companies, those with ad-tech products that were initially
developed for quadrature amplitude modulation set-top platforms still hold value, he added. SeaChange International
is an example of a company that has such a legacy business as it pursues OTT and other next-generation video
opportunities, he said. SeaChange has been the subject of M&A rumors for years, but continues to go it alone.

Another question mark hovering over all of this M&A activity is how an acquired company behaves later and
addresses the needs of clients that dont happen to be its owner. This Technology, FreeWheel and Visible World, for
example, bring great strategic value to Comcast, but its still to be determined how the priorities of those vendors
might evolve and shift in the months and years to come, Hanlon said.

Wheelin & Dealin

A sampling of recent M&A activity in the ad-tech sector in recent months:

Verizon Communications: The carrier clinched its $4.4 billion acquisition of AOL in June, a deal that includes key
programmatic advertising technologies expected to play a role in Go90, a mobile-first OTT offering to feature content
from ACC Digital Network, Campus Insiders, CBS Sports, Vice Media, ESPN, 120 Sports and Awesomeness TV,
among others.

Comcast: Has shored up its advanced-advertising capabilities through three separate acquisitions FreeWheel
(online, multiscreen advertising, March 2014); Visible World/AudienceXpress (targeted and programmatic advertising,
June); and This Technology (dynamic ad insertion, IP video back-office systems, August).

Ooyala: The Telstra-owned multiscreen video specialist acquired programmatic advertising company Videoplaza in
October 2014. Ooyala has since integrated Videoplaza into its broader platform and dropped the brand.

Facebook: In July 2014, the social-networking giant snapped up LiveRail, a video ad platform for publishers and
marketers that counts clients such as Hulu, ABC Family, A&E Networks and MLB.com.

Cross MediaWorks: Inked a deal last week for BlackArrow, a dynamic ad-insertion VOD supplier that reaches
more than 40 million homes thanks to customers such as Time Warner Cable, Comcast, Charter Communications,
Bright House Networks, Rogers Communications and Liberty Global/Virgin Media.