{"id":30448,"date":"2021-04-13T15:01:41","date_gmt":"2021-04-13T14:01:41","guid":{"rendered":"https:\/\/videoweek.com\/?p=30448"},"modified":"2021-04-15T16:44:39","modified_gmt":"2021-04-15T15:44:39","slug":"itv-wants-to-avoid-strategic-baggage-in-media-for-equity-deals","status":"publish","type":"post","link":"https:\/\/videoweek.com\/2021\/04\/13\/itv-wants-to-avoid-strategic-baggage-in-media-for-equity-deals\/","title":{"rendered":"ITV Wants to Avoid ‘Strategic Baggage’ in Media for Equity Deals"},"content":{"rendered":"

\"\"<\/a>In the past couple of years we\u2019ve seen something of a revival in the UK of \u2018media for equity\u2019 deals, where media companies give early stage companies advertising inventory in exchange for a stake in their business. UKTV launched a media for equity fund, UKTV Ventures, in 2018. And Channel 4\u2019s investment arm Channel 4 Ventures has clocked up a number of notable deals in recent years, including investments in vegan food business Meatless Farms Co and life insurance startup DeadHappy.<\/span><\/p>\n

Now ITV is getting in on the act with ITV AdVentures Invest, a dedicated media for equity fund launched last month. Through the new unit, ITV will invest over \u00a31 million worth of ad inventory in digital-first businesses which it believes would benefit strongly from TV advertising. The broadcaster announced its first investment, in mapping and location startup what3words, shortly after launching.<\/span><\/p>\n

In some ways, the timing might seem strange. With broadcasters still engineering their recoveries after the financial impact of the pandemic, making long-term investments which forgo a chunk of ad revenues in the short-term might seem counterintuitive.<\/span><\/p>\n

But Niko Waesche, the seasoned media investor and venture capitalist brought in to manage the AdVentures Invest fund, says the timing makes sense for ITV.<\/span><\/p>\n

\u201cFirstly I think it’s becoming increasingly apparent for direct-to-consumer companies that they cannot rely on digital platforms alone for their advertising,\u201d said Waescehe. \u201cIt\u2019s increasingly difficult and expensive for brands to differentiate themselves on digital platforms. So it\u2019s not enough to only use Google, Facebook and others like them, you need to have a media mix, which includes television.\u201d<\/span><\/p>\n

As such, Waesche says there are a number of young companies looking to move into TV which can benefit from the mix of inventory, guided media planning and campaign support which media for equity deals provide.<\/span><\/p>\n

And Waesche says that offering media for equity (as opposed to just looking to sell inventory to these digital natives) lets ITV capitalise on the high-growth potential for these businesses.<\/span><\/p>\n

\u201cWe saw during the pandemic that digital-first companies and direct-to-consumer companies are becoming such an integrated part of the economy,\u201dhe said. \u201cThe future FTSE 100 will be composed of many companies that we don\u2019t even know the names of today. So I think being a part of the development of that future, and sharing in that value creation, is a fantastic opportunity for ITV.\u201d<\/span><\/p>\n

And while there is an element of ITV forgoing immediate ad revenues through these deals, Waesche said that they\u2019re small enough so as to not hurt the company\u2019s bottom line.<\/span><\/p>\n

\u201cWe are investing substantially in these startups, and we\u2019re looking to make around three to five investments of at least \u00a31 million, up to \u00a35 million, every year,\u201d he said. \u201cBut while those are substantial investments, it\u2019s still small compared to ITV\u2019s overall ad revenues. So our commercial colleagues are completely supportive of the whole thing!\u201d<\/span><\/p>\n

Avoiding \u2018strategic baggage\u2019<\/b><\/p>\n

With the deal for what3words wrapped up, AdVentures Invest will continue looking for other potential candidates.<\/span><\/p>\n

The fund will be targeting VC-funded startups with mass-market target groups, since these sorts of companies are most likely to benefit from TV advertising.<\/span><\/p>\n

\u201cOne of the things that attracted us to what3words is that they have a very broad target audience,\u201d said Waesche. \u201cEssentially their goal is to have their app installed on everyone\u2019s phone. That works really well for ITV – we have a massive reach of over 40 million per week in the UK. So companies with broad target markets will benefit the most.\u201d<\/span><\/p>\n

ITV will primarily be looking at \u2018digital-first\u2019 companies, since these are most likely to fit ITV\u2019s target of venture capital -funded businesses with quick growth potential. \u201cBut that doesn’t mean that we couldn’t invest if there was something like a new food brand with a very good ecological impact, even though it’s not necessarily a digital first company,\u201d siad Waesche. \u201cThe venture capital financing and the quick path to growth are the most important aspects.\u201d<\/span><\/p>\n

Interestingly, ITV won\u2019t be looking for companies which have any kind of synergy with its own business.<\/span><\/p>\n

\u201cWe\u2019re looking to invest in companies that are very different from us,\u201d said Waesche. \u201cWe\u2019re looking at these as financial investments, and we don\u2019t want to come with a lot of strategic baggage. That might sound contradictory, but the else strategic we are, the more we\u2019ll be accepted by other VCs. They can see that we\u2019re just investing media, and they\u2019re not left wondering whether we\u2019ve got any other strategic objectives.\u201d<\/span><\/p>\n

After ITV has identified a target, the broadcaster will also review its own media and look at potential media packages which it could offer the startup. \u201cEven before we\u2019ve invested, our creative strategists, media planners and commercial pricing experts work with the company to understand whether it\u2019s a good fit between the startup and our media portfolio,\u201d said Waesche.<\/span><\/p>\n

This means that if ITV does invest in a business, a custom media plan which spans across ITV\u2019s inventory sources has already been created. Once the investment is completed, the startup can either work with their agency to book the media while the campaign is up and running, or ITV can provide an operations team to do the same thing.<\/span><\/p>\n

These custom media plans aren\u2019t set in stone. The startups can adjust their campaigns while they\u2019re running in order to refine them, to try to get the best results possible.<\/span><\/p>\n

Opportunities for alliances<\/b><\/p>\n

In some ways it\u2019s surprising we don\u2019t see media for equity deals in the UK more frequently. The business logic behind media for equity deals for broadcasters seems strong – since they bring new advertisers into TV, while also diversifying revenues. And the media for equity model is well known across Europe. ITV says that over 400 startups have taken advantage of similar deals across the continent.<\/span><\/p>\n

Waesche said there might be opportunities for more smaller media companies in the UK to strike similar sorts of deals, through grouping together to offer greater scale.<\/span><\/p>\n

Waesche previously co-founded German Media Pool, an independent German media for equity fund which draws inventory from over 20 different media owners across television, radio, print, and out-of-home.<\/span><\/p>\n

\u201cFor us at ITV, we have such a broad reach that we don\u2019t need to work with other broadcasters to bring in more media,\u201d said Weasche. \u201cBut I think it would definitely be interesting in the UK to see a fund which bundles together medium-side media groups, and helps them strike media for equity deals.\u201d<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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