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KIT Digital’s Shopping Spree Continues

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Prague-based KIT Digital (s KITD) has spent the last few years acquiring other online video companies, picking up new clients and bits of technology. Now the video management firm is continuing its shopping spree, with the acquisition of KickApps, Kyte and Kewego. Those companies, which together will cost $77.2 million, will add some social and mobile capabilities, as well as a stronger presence in the Western European online video market.

New York-based KickApps has mostly been known for social networking tools that publishers could use to build communities on their websites, but lately has extended its capabilities to create social environments through online video players. Using Adobe’s (s ADBE) Open Source Media Framework (OSMF), KickApps enables publishers to add social tools to videos with its drag-and-drop App Studio. According to KIT Digital CEO Kaleil Isaza Tuzma, whom we spoke to in a phone interview, those capabilities are already mostly integrated into its video management platform.

Meanwhile, San Francisco-based Kyte brings mobile expertise to KIT, with tools for broadcasting video to and from multiple mobile devices. Isaza Tuzma told me it was clear that KIT needed to fill in gaps in its product capabilities when it went up against Kyte for some business that it didn’t end up winning. “We lost a couple of pitches to Kyte based on their mobile publishing tools and mobile SDKs,” he said. “If you can’t beat ’em, join ’em.”

As for Kewego, the Paris-based video platform provider will give KIT a stronger presence in Western Europe. It also has a focus on enterprise video offerings, according to Isaza Tuzma, and has developed some behind-the-firewall applications that KIT could use for its corporate clients.

In addition to the technology features KIT Digital gains through the acquisitions, the company is also adding some key personnel. As one example, KickApps CEO Alex Blum will assume the role of COO at KIT. Kyte COO Gannon Hall will be taking on EVP of marketing at KIT, while Kewego Chairman Michel Meyer joins as senior VP of product management.

The acquisitions should also boost KIT’s revenues. According to KIT Digital, KickApps had annualized revenues of more than $12 million; Kewego reported sales of $10.2 million in 2010; and Kyte had $3.7 million in revenues. KIT reported revenues of $27.7 million during the third quarter last year, and expects to have sales exceeding $100 million when it reports full-year earnings.

The new acquisitions follow KIT’s modus operandi of picking up assets on the cheap; prior purchases over the last few years include Benchmark Broadcast Systems, Multicast Media, The Feedroom, Nunet AG and Narrowstep, all of which were picked up for less than $20 million.

Investors in KIT’s latest acquisitions probably didn’t fare much better, considering the total purchase price versus how much each of the companies had raised. KickApps, for instance, raised approximately $27.5 million since being founded in 2005, while Kyte has raised $23.4 million and Kewego raised $19.4 million. Without going into the individual terms of each deal, Isaza Tuzma said that about $15-16 million of the total purchase price would be paid in cash, while the remainder would be paid in stock over time, based on the entire company’s performance.

While KickApps, Kyte and Kewego add new features to its video management platform, KIT isn’t done shopping. Late last year, it issued a public offering of more than $100 million of its stock. And Isaza Tuzma said KIT is planning to use that cash to reel in at least one more major acquisition using that cash.

So far, it appears KIT Digital’s aggressive acquisition strategy appears to be working, as its revenues have more than doubled over the previous year. In KIT’s third-quarter earnings statement, Isaza Tuzman is quoted as saying KIT Digital looks to increase its global market share from approximately 20 percent to 50 percent within the next 12 to 24 months.

As for the broader video management segment, KIT’s ability to acquire so many of its competitors, especially at what appear to be fire-sale prices, shows how quickly the tide has turned for what was once a fast-growing portion of the market. Despite a string of funding announcements from a number of online video platform providers just a few years ago, it seems that capital has largely dried up. While the market for online video publishing continues to grow, it apparently hasn’t grown quickly enough to support the large number of startups offering cloud-based video management platforms.

Photo courtesy of (CC BY-SA 2.0) Flickr user Tracy O.

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