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Telstra beats a retreat from ad tech with Ooyala write down

Telstra has written off the value of its Ooyala video platform business, as the telco moves the company away from its struggling ad tech operations to focus the service’s other features.

After taking a controlling 98% stake in the video service in 2014, Telstra has written off the $US313 million it invested in the business in a series of write downs culminating in last week’s announcement.

The company claimed the decision was based around the service’s poor ad tech performance.

“Ad tech, has not performed well and we will therefore seek ways to exit that part of the business,” said Stephen Elop, Ooyala’s board chairman and Telstra’s chief executive for technology, innovation and strategy, in a stock market announcement.

Ooyala chairman and Telstra executive Steve Elop: “We will sharpen Ooyala’s focus by exiting ad tech”

Ooyala’s general manager for the Asia Pacific, Steve Davis, described the challenges facing the ad tech side of the business at a media lunch the day before the announcement, saying: “Ad tech is in an interesting place at the moment as the gorillas keep getting bigger publishers need to figure our how to fight FAANG [Facebook, Amazon, Apple, Netflix and Google].

“We can’t read the future, but what we are doing as a company it’s really good growth right now and we have really good growth and belief from the higher ups.”

Elop’s ASX statement affirmed the company line that Telstra will continue to back the service: “We will sharpen Ooyala’s focus by exiting ad tech and focusing on the underlying video platform and continuing to serve our customers,” he said.

“Importantly we do see a future in the other core parts of the Ooyala business – video player and the workflow management system. The new Ooyala management team is making positive progress through improved booking trends, product quality and reduced customer churn. However the business has yet to achieve sufficient scale,” Elop continued.

Elop also defended the acquisition, made under previous CEO David Thodey: “This was a business that Telstra purchased when the market dynamics were very different.”

At the media lunch, Davis wouldn’t be drawn about speculation around Ooyala’s feature as a Telstra subsidiary, saying: “As a parent, they are a very good parent because they back us. What they decide to do with us is way beyond my pay grade.”

“It doesn’t really affect us day to day,” he continued. “All I care about is how we are taking care of our customers, are we increasing our revenues as a company and how we are growing. Telstra has very little to do with that.”

Davis did lay out where he saw Ooyala’s strengths in the local and Asia Pacific markets flagging esports, the NRL in Australia and cricket’s Indian Premier League as being big drivers for the business, along with the consolidation of over the top video platforms, where Ooyala sees its services adding value for content producers.

Telstra’s shares were unaffected by the Ooyala announcement on the day, however they have fallen 4% in line with the stock market’s broader declines this week.

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