Cisco (NSDQ: CSCO) is in the process of acquiring ExtendMedia, a company that specializes in managing online video content. The space has seen some consolidation lately and with the growth of mobile video, the rate of acquisitions is likely to increase rapidly. The terms of the deal were undisclosed. Cisco has recently completed a number of large acquisitions in the video space, including last year’s $3.41 billion purchase of Tandberg and the $590 million deal for Flip camera manufacturer Pure Digital before that. Boston, Mass.-based ExtendMedia has previously raised about $33 million in venture capital.
Updated: The deal was done for about $80 million, according to Streaming Media’s Dan Rayburn, who cited unidentified sources. That number might seem a bit much for a small company like ExtendMedia — the purchase price gives ExtendMedia a 4- to 5x multiple on the revenue it brings in, Rayburn adds. But Cisco was willing to meet that price due to “competitive reasons.”
Over the past year, ExtendMedia has been working to power cable companies’ “TV Everywhere” services to devices other than the PC. Its main product, the OpenCASE software platform, supports video distribution to mobile devices as well as game platforms, set-top boxes, and WiFi-enabled HDTVs.
That “multi-screen” approach is what attracted Cisco to ExtendMedia. Cisco expects to quickly fold those services into its own video architecture once the deal is complete, which should be by the first half of next year. It’s also worth pointing out that while online video is still relatively small in terms of overall internet advertising revenues, it’s the fastest growing segment. As eMarketer estimates, advertisers will spend $1.5 billion this year on video ads, up 48.1 percent over last year. By 2014, the market for online video ads is expected to reach more than $5.5 billion.
Most of ExtendMedia’s staffers will be added to Cisco’s Service Provider Video Technology Group, while the company’s sales and professional services teams will become part of Cisco Sales and Advanced Services organizations.
Meanwhile, at least one other white label video service has rapidly reacted to the news of the acquisition. Comcast’s thePlatform released a statement this morning emphasizing its “flexibility” and independence as its value proposition, while mentioning that Cisco is one of its many content delivery partners. It doesn’t expect the acquisition to sever that tie, but it sounds like its trying to prepare for that possibility. Release