As Video Space Heats Up, SpotXchange Closes $12 Million Round

Over the next five years, online video ad spending is expected rise 19.6 percent annually, according to last week’s Magna Global forecast. So this is probably a pretty good time to be an online video ad network and think about those expansion plans. That’s what SpotXchange plans to do with the $12 million funding from H.I.G. Growth Partners. The news comes as Meredith (NYSE: MDP) was launching its own video network aimed at women and tied to its magazine titles, including Parents, Family Circle, More and Fitness.

In a statement, Michael Shehan, SpotXchange’s founder and CEO said that the company was already profitable without the additional investment (the company had received angel funding two years ago). The company plans to do a lot more hiring and is looking to expand its presence internationally, though the company didn’t say where it was planning on planting its flag.

The gold rush into online video has been building for a while. But lately, there seem to be a lot more activity around the space, something that is surely going to continue into next year. In addition to Magna’s prediction, this summer, eMarketer estimated that U.S. online video ad spend will rise 48.1 percent in 2010, to $1.5 billion. Also, WPP’s Kantar Video projects that spending in that space, including mobile and online, could reach $10 billion on a global level in just five years.

The fall has been a particularly hot time to either buy or fund an online video ad company. Undertone, which has been working on broadening its image beyond being an ad network, acquired online video ad network Jambo Media. That was preceded by online ad firm Specific Media’s purchase video ad network BBE.

Mobile video advertising is the next frontier. Rhythm NewMedia just raised a $10 million third round, citing the need to keep up with increasing demand from marketers. Things were not so hot a few years ago, when the company pulled back on international to concentrate on the U.S. market. But in another year or so, if things keep going in the same direction as it is now, the company could be back competing in emerging markets are broadband penetration and ad spending grows.

One of the most notable deals of the fall was Tremor Media’s acquisition of streaming ad placement service ScanScout. Both companies have been in expansion mode for the past year.

Aside from SpotXchange’s general growth plans, the added funding will help it compete as its rivals have all either been bent on acquiring or taking in more funding themselves. Over the past year, video ad players such as YuMe, TidalTV, BrightRoll, have all raised substantial sums of money. Next year, if the growth expectations set down by the forecasters are met, these same companies will probably start acquiring and the consolidation of the space will start beginning in earnest.