integrating DG’s TV-ad business, which makes up two-thirds of DG’s revenue. I wouldn’t normally buy that—after all, most mergers fail quietly and miserably. But when Roland says, “I know the company so well,” he’s speaking from more than 10 years of experience competing with (and being acquired by) DG. That knowledge is worth something.
The real hurdle, he says, is “trying to bring order to the chaos of online advertising.”
That’s a process that ultimately could take 10 to 20 years, he says. “Our goal is to provide some leadership in online video and the mobile space. We know video is never going away. Sight, sound, and motion is the best way to engage your consumer, whether it’s TV, online, or mobile.”
In television, Roland says, 25 big companies control $60 billion in ad revenues. In online and mobile, it’s more like 250 companies going after $5 billion, a much smaller pie. But to Extreme Reach and its ad-delivery platform, it’s all the same—“for us it’s all IP addresses,” Roland says—so it makes sense to capitalize on the TV market now.
But why did DG sell? Its TV business was losing money and its revenues were in decline. DG is apparently staking its future on its remaining online-ad business, which will become a new publicly traded company.
It’s interesting that Extreme Reach thinks it can pick up the slack and make DG’s TV business mesh with its existing ad platform/network in a profitable way. As I see it, Extreme Reach’s software streamlines the delivery of video ads from the various agencies to online publishers and TV stations; it also helps brands and advertisers manage and measure their campaigns.
If it can do all of that well enough, the company stands to move farther upstream in the video-ad industry—and can capture a lot more business.
As Roland explains, “We looked at it as not so much, ‘Will TV win, or online win, or mobile win?’ But, ‘What is common and core to all three?’ The 15-, 30-, and 60-second commercial.”
That hints at the ultimate fate of Extreme Reach, too. Roland wouldn’t comment, but I could see the company eventually being caught in an acquisition tug-of-war between traditional TV players, like Comcast and NBC, and Internet companies wanting to move closer to the origination of all video, like Google, Amazon, Yahoo, and AOL.
If all goes well, that could mean a big payout. But in the meantime Roland will have his hands full running a much larger company—with much larger stakes.
“It’s just execution,” he says.
