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Facebook’s Acquisition of LiveRail is a Smart Move

July 23, 2014 | About:

Facebook Inc. (NASDAQ:FB) is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about. Developers can use the Facebook Platform to build applications and Websites that integrate with Facebook to reach its global network of users and to build personalized and social products.

Facebook, the world's No.1 social network with 1.2 billion users, generates the majority of its revenue by showing ads that target users by age, gender and other traits.

FB has decided acquire video advertising network, LiveRail. This is a good move made by the company.

LiveRail was founded in 2007 and offers a comprehensive platform for online video publishers that help them find and serve the best ads possible. LiveRail also helps marketers by providing them with access to premium video inventory and the information that they need in order to decide where to show their ads. What LiveRail ultimately offers is a complete advertising solution for video publishers. LiveRail’s major customers include Major League Baseball, A&E Networks, Gannett and Dailymotion.

About the Acquisition

LiveRail, Facebook and the premium publishers it serves have an opportunity to make video ads better and more relevant for the hundreds of millions of people who watch digital video every month. More relevant ads will be more interesting and engaging to people watching online video, and more effective for marketers too. Publishers will benefit as well because more relevant ads will help them make the most out of every opportunity they have to show an ad.

FB has roughly paid $500 million for this deal. LiveRail acquisition is relevant to Facebook’s capabilities in ad networking. The social network launched its Audiences network to sell mobile ads and apps in April.

In Apr 2014, at its F8 Conference, Facebook launched its long-awaited ad platform called Facebook Audience Network (FAN). Per sources, FAN and LiveRail would work together to bring accurately targeted video ads to all sorts of apps.

What the Acquisition will Mean

The acquisition of LiveRail will boost the company's future video advertising revenues. Having a company like LiveRail in-house is not only great for growing Facebook's future video ads business, but will also give the company an opportunity to generate revenues utilizing the very popular video ad network.

It has a lot of user data and there will be a synergy in adding LiveRail’s technology into the mix. Since LiveRail claims it delivers 7 billion video ads per month, the acquisition gives Facebook the reach to run targeted campaigns across multiple sites. The deal will bring new source of revenues for FB.

The acquisition will enable Facebook to offer better quality video ads around the web going forward. Moreover, LiveRail’s Checkpoint technology, which helps in ensuring that ads for tobacco, alcohol and other age-limited products are not shown to kids, will be an added benefit for Facebook.

The addition of this San-Francisco based video advertising company should substantially broaden the inventory opportunity for FB sales, offering greater audience reach and an ability to sell into a broader range of video advertisers.

On a Concluding Note

Facebook has more than 1 billion users, and is still growing this tally above 20% year over year. The massive amount of data that the company has already collected (and will continue to collect) from the billion plus users will be an extremely valuable asset that can be utilized in various ways to generate revenue. The future remains bright for Facebook and another major catalyst for the stock can be the company's inclusion within the S&P 500 index. The company fits the guidelines for inclusion as Facebook is a well established leader within the advertising space.

LiveRail is the largest monetization platform for video publishers, and it already serves hundreds of active customers with more than 7 billion video ad impressions every month for numerous online companies. Having this company in the kitty will help FB in furtherance of its objectives.

Video ads command higher prices than other forms of online advertising such as banner ads. Facebook and Internet rivals like Google Inc (NASDAQ:GOOGL) are increasingly trying to grab a slice of lucrative TV-marketing budgets as they try to sustain rapid growth.

LiveRail is known for having robust technology focused on video ad sellers. Buying LiveRail gives a great deal more substance to Facebook's product plans around digital video advertising, which to date have mostly consist of user-initiated video ad formats tied to Page Posts.

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