Facebook Inc (FB)’s LiveRail Acquisition A Smart Move


Facebook Inc (NASDAQ:FB)’s latest acquisition is online video platform LiveRail, and analysts from Goldman Sachs and Nomura both say it was a strategic decision that makes sense for the social network. LiveRail brings ad technology that will help publishers better target their viewers through better video ads on their aps and websites.

Facebook Inc (FB)'s LiveRail Acquisition A Smart Move
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Did Facebook pay a fair price?

Although Facebook and LiveRail did not disclose the purchase price, TechCrunch said the social network paid between $400 million and $500 million. Although analysts don’t know anything about LiveRail’s financials, TechCrunch reported in December that the company was heading to hit $100 million in annual revenues last year, which would have been a 300% year over year increase.

In a report dated July 2, 2014, Nomura analysts Anthony DiClemente and Ron Zember said they’re unsure about LiveRail’s valuation because there have been various levels of success from the different advertising technology companies. However, they are optimistic about Facebook’s strategy to improve ad targeting by making them more relevant, thus attracting a bigger piece of the advertising pie.

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Facebook makes a strategic decision

The Nomura team thinks the 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. Also it has a lot of user data, so they see the synergy in adding LiveRail’s technology into the mix. That technology can integrate with Facebook’s data to improve the relevance and targeting of video ads. The Nomura team also reports that their channel checks suggest Facebook is trying to steal brand ad dollars from TV, and they think LiveRail will help it do that.

In another report also dated July 2, 2014, Goldman Sachs analysts Heather Bellini, Shateel Alam and Justin Rowley also emphasize the strategy behind Facebook’s acquisition. They say LiveRail will increase Facebook’s scale and insight on the delivery of video ads. The social network  has been busy rolling out video ads to News Feeds, so adding LiveRail’s technology will only improve their relevance to users.

Facebook gets more scale

The Goldman Sachs team adds that brand advertisers want greater scale when they run video ad campaigns. Since LiveRail claims it delivers 7 billion video ads per month, the acquisition gives Facebook the reach to run targeted campaigns across multiple sites. They think it will even make it possible for the social network to complement TV campaigns with its video ads.

They also note that Facebook has been pretty cautious in its rollout of video ads because it doesn’t want to disrupt the experiences of users. They think the acquisition will also provide the social network with more expertise on delivery video ads and also the large scale brand advertisers want in their video ad campaigns.

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