Roku Snaps Up Nielsen’s Video Ad Business; Shares Gain 3.7%

Shares of Roku rose 3.7% in extended market trading on March 1 as the digital media player company agreed to acquire Nielsen’s Advanced Video Advertising (AVA) business for an undisclosed sum. Nielsen stock climbed 4.6% in after-hours trading.

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Roku (ROKU) said it will also enter into a long-term commercial agreement to integrate Nielsen’s ad and content measurement product, Total Ad Ratings (TAR) into the its platform. Nielsen is an ad measurement, and data analytics company. The transaction is expected to close in the second quarter of this year.

Nielsen’s (NLSN) AVA business includes its video automatic content recognition (ACR) and dynamic ad insertion (DAI) technologies. The acquisition of the AVA business aims to accelerate the launch of Roku’s end-to-end DAI solution for television programmers.

As a result of the commercial agreement between the two companies, publishers will be able to implement Nielsen Digital Content Ratings (DCR) and digital ad ratings on Roku’s media sales and ad-buying platform, OneView.

Roku’s VP of Product Management, Louqman Parampath said, “Combining Nielsen’s AVA technology with Roku’s innovative ad tech and scale will enable us to deliver the benefits of TV streaming advertising to traditional TV. “

“Roku will bring the promise of DAI to the market for the first time ever at scale — providing better targeting and measurement for advertisers, creating easy integration and additional revenue opportunities for programmers’ ad sales teams, and improving the TV experience for viewers. We’re also excited to become a key strategic partner for Nielsen in their new cross-media measurement products, and jointly drive toward greater transparency and accuracy in TV streaming measurement,” Parampath added. (See Roku stock analysis on TipRanks)

On Feb. 18, Oppenheimer analyst Jason Helfstein ramped up ROKU’s price target from $260 to $500 and reiterated a Buy on the stock.

Helstein said, “Roku should benefit from the secular trend of advertising dollars leaving linear TV in favor of OTT platforms. Roku is leveraging its 1P content channel, The Roku Channel, to drive favorable economics, as well as a large pool of OTT advertising spend occurring outside of the Roku platform.”

The rest of the Street is cautiously optimistic on the stock with a Moderate Buy consensus rating based on 12 Buys, 6 Holds, and 1 Sell. The average analyst price target of $478.37 implies around 14% upside potential to current levels.