The Google Divestiture Cometh; Tasty Watching That Deal Live On Platform; Musk Takes On The Bots
This is the FirstPartyCapital weekly newsletter. It covers news and updates about the FirstPartyCapital fund and its portfolio companies.
Will Google Be Forced To Sell Its Third Party Ad Tech Stack?
The odds on Google spinning out its ad tech stack are shrinking this week with the introduction of a bi-partisan law that could restrict the likes of MAGA (Meta, Apple, Google and Amazon) owning and operating any third party ad tech.
We are dubbing it the “ad tech law”.
The Competition and Transparency in Digital Advertising Act (we prefer “ad tech law”) would restrict companies making over $20 billion operating in parts of the eco-system - affecting a number of big name ad tech players.
The bill would have serious implications for Google’s existing ad tech business: potentially forcing it into a divestiture within 12 months of the bill passing
In effect, the legislation would likely require Google to divest significant portions of the digital advertising business it built following its 2008 acquisition of DoubleClick Inc., Mr. Lee said. “It’s just a massive, massive business they’ve got going,” he said. Google’s “network” business, which includes tools used by third parties to buy and sell ads, generated $31.7 billion in revenue in 2021.
Companies would have a year from the enactment of the legislation to comply with the new rules.
Now, before you go planning your Google-leaving-ad-tech party, it’s good to get some perspective here.
For one, this is proposed bill is at the very early stages. There will be a whole raft of steps before it ever becomes law.
Secondly and most importantly, Google runs one of the biggest lobbying operations in Washington. It will be working hard to water this down.
Given all this though, it is hard to see how a divestiture is not inevitable at some stage.
Watching That Raising a Pre-Series A Round
Global advertising revenue earned by video streaming platforms has now reached $90 billion per year, and free AVOD (advertising-based video on demand) services are becoming increasingly popular.
Despite the enormous advertising spend on this channel, there are significant limitations in the measurement and monitoring solutions available. Most companies in this category began as measurement solutions for linear TV, video inventory on the web, or have tried to adapt their technology from other verticals. Very few have built their technology with streaming (particularly on Smart TVs) as the core focus from the start.
Research shows that a typical AVOD and Live Streaming publisher has over 1,500 ad placements offered to 12 programmatic buying partners across 1,530 content series available to stream on 96 sites.
It is an impossible task for humans to monitor this, and identify the issues that result in millions of dollars being left on the table.
According to the former MD of Sky Media:
“Advertising revenues from streaming video (Live and OnDemand) at Sky are growing fast and already over $200M per year. As MD of Sky, I believed we were losing potentially over $20M of revenue per annum based on the technical faults and operational inefficiencies that Watching That identifies and solves for. Licensing their technology was a no brainer to recapture that lost revenue. I believe in the business so much I have personally invested and joined the advisory board.”
To continue its international expansion, especially into the US market, Watching That is now doing a new pre-Series A round.
This deal is now live on the FirstPartyCapital angel syndicate platform:
ATTENTION UK INVESTORS - THIS IS ELIGIBLE FOR EIS TAX RELIEF.
If you have not yet signed up to be part of our angel investment syndicate, fill in this form to start accessing our deal flow: share-eu1.hsforms.com/1ol4kzk-5rxkyclytlnja4gf7q0l.
Elon Battles The Bots
Elon Musk, FirstPartyCapital’s favourite crackpot billionaire, is looking to get out of the Twitter deal. He believes the bot problem at Twitter is way bigger that the company its guesstimate of <5%.
It is a a guesstimate because Twitter has - AHEM - no idea as to the exact number of fake users it has.
Elon is not happy with this Twitter assertion, and wants evidence to support the <5% number. He believes the number is north of 20%. FirstPartyCapital believes it is probably 40% plus.
The deal is now in the balance. If Elon doesn’t get the evidence he requires, he will pay the break up clause ($1 billion) and skip town.
He is getting it in the neck from everyone with regard to this M&A soap opera. It’s a proper s*** show. Did he not think to do some basic due dill before embarking on this crazy endeavour?
Regardless of the side show, Musk has inadvertently shone a light on a huge problem for advertisers: bot traffic. All the major platforms have a similar issue when it comes to bots. We have seen big investment in the anti-fraud segment in ad tech over the past ten years.
With stories like this in the public domain, the demand for bot-detection solutions will only grow. Elon may have actually done the industry a huge favour.
Have a great weekend, readers.