Will Unruly’s Acquisition Help News Corp Accelerate Its Digital Business?

In September 2015, News Corporation (NASDAQ:NWSA) announced that it had agreed to acquire Unruly Holdings, a global ad platform with video-sharing and tracking capabilities. Unruly’s competence lies in predicting the potential for video advertisements to go viral based on historical behavior. This acquisition will help News Corp provide new insights to its advertisers and improve ad engagement. We believe this will strengthen the company’s digital business and could be accretive to its advertising revenues. This move comes at the back of other significant acquisitions made by News Corp in the technology space such as Storyful (2013), which authenticates and widely distributes video content for partners, and Checkout 51 (2015), a mobile savings app.  Traditionally known for its publishing business, News Corp is now focusing on building a foundation for digital growth.

See our complete analysis for News Corporation

Unruly Will Help Engage Growing Digital Advertisers On News Corp’s Internet Properties

In addition to traditional print media, News Corp delivers its content through digital platforms such as websites, mobile apps and electronic readers.  While almost the entire revenues from its Digital Real Estate segment are via electronic advertisements, they also form a significant part of the cable and network programming division’s ad revenues. We expect Unruly’s acquisition to help News Corp boost its digital ad revenues in the long run by improving user engagement and targeting. Unruly’s technology includes predictive algorithms which can help advertisers customize their content to attract more likes and shares. Additionally, Unruly has developed a mobile video ad format that adapts itself to the news feed and auto plays once the ad is in view of the page. Other players such as Facebook are also using auto play to amplify a video campaign. Following the  acquisition, News Corp also expects to use Unruly’s technology team to build premium video inventory for its News UK mastheads. We expect these technology enhancements to improve News Corp’s digital business and attract more advertisers.

Advertisers Are Expanding Online Ad Budgets And News Corp Can Tap Into This Trend

The $600 billion advertising industry is undergoing a rapid transition. Budget allocation for online ads is increasing while worldwide print ads are down over 17.5% in the last five years. Additionally, eMarketer estimates that  advertisers will spend $64.25 billion worldwide on mobile advertising  in 2015, an increase of nearly 60% over 2014 (Read Trends in Global Advertising Industry : Winners and Losers – Part I).

Although News Corp’s largest revenue generator – the news and information services segment – is transitioning to digital media, it is still primarily dependent on print advertising revenues. This segment’s sales dropped by 10% during the last fiscal year. We expect this decline to continue over our forecast period; however, increased focus on digital initiatives such as the recent acquisition of Unruly might help the company to arrest this decline. This division has been looking at digital assets for future growth and has enhanced its digital offerings in recent years. Its Wall Street Journal app is one such example.

News Corp’s  management states that more than 50% of its digital audience is accessing its content via mobile devices as compared to 20% three years ago.((Tech Story)) Strategic acquisitions in this space will enable News Corp to engage mobile advertisers more meaningfully, leading to higher ad spending on its digital platforms.

News Corp’s digital real estate business had more than 55 million unique monthly users a year ago, and we expect this business to generate nearly $600 million in revenues in 2015. If we compare revenue per unique visitor to that of other Internet giants, we find that News Corp is already being quite efficient in terms of monetizing its real estate websites. News Corp has made significant acquisitions in this space such as  Move Inc. which operates Move Network of websites and iProperty which operates websites in Malaysia, Singapore, Hong Kong and other Asian countries. While Unruly could take this monetization to the next level, opportunity exists for News Corp to accelerate digital revenue growth for its news and information services business.

View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research